The Least Tax-Friendly States in the U.S.
Depending on where you live – or own property – high sales taxes, income taxes, property taxes or gas taxes could slowly drain your funds every time you pull out your wallet, costing you thousands every year.. And it could get worse: Tax-reform proposals in Congress seek to eliminate or cap the federal deduction for state and local taxes paid, making their effect on your wallet that much greater. Here is a list of the 10 least tax-friendly states in the U.S. (in order of least friendliest):
1. Maryland – Goes to the top of our least tax-friendly list this year for one reason: steep local income taxes. Maryland is among a handful of states that allow localities to levy their own income taxes on top of state income taxes. When you include these taxes, the state’s effective income tax rate soars.
2. Minnesota – What really stands out is is its income tax rate of 5.35% even for the state’s lowest earners. A single resident with income of $45,000 a year would pay more than $2,000 in state income taxes.
3. New York – Has a considerable income tax rate, and its average sales tax rate is the 9th-highest in the country. The property taxes are the 11th-highest in the U.S. At 12 cents per gallon higher than the national average, New York’s gas taxes are hefty. And don’t even think about being a smoker: the state tax on cigarettes is $4.35 per pack, the highest in the U.S. New York City tacks on an additional $1.50 per pack.
4. Illinois – With the largest state budget deficit in the U.S., Illinois ranks #49 in the annual ranking of states’ fiscal health.Add to that, property taxes in Illinois are the second-highest in the nation. And then factor in this: Sales taxes are high, too. The combined average state and local sales tax is 8.64%, the 7th-highest rate in the U.S.
5. Maine – This state has been working to lower its income tax bite: In 2016, the top rate fell from 7.95% to 7.15%. But with a “low” rate of 5.8%, it’s higher than some other states’ top rate. Maine’s property tax is the 17th-highest in the U.S. On the plus side, Maine is one of only a few states that prohibit local jurisdictions from imposing their own sales tax, so you won’t pay more than 5.5%, no matter where you live or shop.
6. Vermont – The Green Mountain State’s effective tax rates are lower than those imposed in nearby New York, but it’s a pricey place to live if you’re wealthy. Vermont limits deductions to $15,000 for single residents and $31,500 for married couples — costing millionaires about $5,000 in additional state taxes every year. Vermont is also an expensive place to own a home, having the ninth-highest property tax in the U.S.
7. Hawaii – The Aloha state has the highest effective income tax rate of all 50 states (only Washington, D.C., has a higher rate). While Hawaii’s average combined state and local sales tax rate is 4.35%, among the lowest in the U.S., that’s misleading because few purchases, other than prescription drugs, are exempt from this general excise tax – even non-tangible items, like designing and consulting services, are taxable. Gas taxes are 44 cents a gallon, the third highest in the U.S.
8. California – Their top income tax rate of 13.3% is the highest in the U.S. While it doesn’t kick in until income exceeds $1 million, a married couple with earned income of $150,000 would pay about $7,500 a year in state income taxes. California also has the highest statewide sales tax, at 7.25%. The average state and local combined rate is 8.25%; in some cities, the combined rate is as high as 10%. Gas taxed at 41 cents per gallon are the 5th highest in the U.S. Also some of the highest real estate prices in the U.S.
9. Connecticut – The Constitution State is an expensive place to live. Connecticut’s property taxes are the fourth-highest in the U.S. And you’ll pay the eighth-highest gas taxes every time you fill up. On the plus side, there are no local sales taxes in Connecticut, so you’ll pay only the statewide rate of 6.35% (slightly below average) on most of your purchases.
10. New Jersey – The effective tax rate for Garden State residents is relatively low compared with some other tax-unfriendly states. But while New Jersey gives residents a break on income taxes, it slams you when you buy a home. New Jersey’s property taxes are the highest in the U.S. In late 2016, legislation raised the state’s gas tax from 14 to 37 cents per gallon—the ninth-highest in the country.
Hope you had a Kleenex handy! This compilation of the 10 least tax-friendly states indicate where you’ll pay above-average taxes on income, property, gas and almost everything you buy. Your TaxProblemSolver.com Team is always here to help you through any pitfalls or problems regarding tax matters of any kind! We are here for YOU!
About the Author Larry Heinkel J.D. LL.M
Larry Heinkel is a tax and bankruptcy attorney with more than 38 years experience helping businesses and individuals, solve their state and federal tax problems. Mr. Heinkel has been extremely successful in representing his clients before IRS and DOR, and is known throughout Florida as an expert in tax problem resolution.
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