State Tax Burden
February 17, 2011, Submitted by: Ken Tweet
One way to look at State tax burden when comparing one state with another, is to use the same weighting factor (or value, or importance) for each category (sales tax, income tax, property tax). If you value each category the same, that is, sales tax is just as important to you as income tax which is just as important as property tax, the results are as follows.
Using the data from an earlier post, Lowest to Highest Taxes by State, each tax category was individually ranked from lowest to highest for each state (sales tax, income tax, and property tax).
The data was ‘normalized’, meaning that the values were processed in a way that makes it possible to be compared against other values (apples to apples).
Then, in this example, the tax category ‘normalized’ values were added together for each state, and then sorted from lowest to highest.
State Tax Burden (sales, income, property)
The same weight is applied to each category
lowest to highest (best to worst, most favorable to least favorable)
1 Wyoming
2 Florida
3 South Dakota
4 Delaware
5 West Virginia
6 Nevada
7 Kentucky
8 New Hampshire
9 Arkansas
10 Michigan
11 New Mexico
12 North Dakota
13 Colorado
14 Alaska
15 Tennessee
16 Indiana
17 Pennsylvania
18 Ohio
19 Hawaii
20 Texas
21 Montana
22 Oklahoma
23 Mississippi
24 Utah
25 Louisiana
26 Alabama
27 Idaho
28 Georgia
29 Virginia
30 Arizona
31 Maryland
32 Maine
33 Washington
34 North Carolina
35 South Carolina
36 Massachusetts
37 Oregon
38 Connecticut
39 Wisconsin
40 D.C.
41 Missouri
42 Iowa
43 Nebraska
44 Kansas
45 New Jersey
46 Minnesota
47 Rhode Island
48 Illinois
49 Vermont
50 New York
51 California
Another way to look at the tax burden data is to apply more importance to certain categories in order to better represent your own concerns. In the following example, the most weight (or importance) has been applied to property tax (it never goes away – even after retirement), followed by income tax, followed by sales tax.
The specific weighting factors chosen are,
property tax (4x)
income tax (3x)
sales tax (2x)
This particular weighting is designed to better represent an example where someone is researching a move, and will be earning income that fits more-or-less the average U.S. worker -roughly $60K (state income tax rates were mostly the same between $50K – $100K), and someone who will be purchasing a home with the likelihood of retiring there and is concerned about property taxes (which will never go away – even after retirement).
State Tax Burden (sales-income-property)
Category weighting is applied as described above.
lowest to highest (best to worst, most favorable to least favorable)
1 Wyoming
2 Florida
3 West Virginia
4 Tennessee
5 Delaware
6 New Mexico
7 Nevada
8 Arkansas
9 South Dakota
10 Kentucky
11 Indiana
12 Alabama
13 Mississippi
14 Louisiana
15 Oklahoma
16 Colorado
17 Arizona
18 Michigan
19 Ohio
20 Utah
21 Hawaii
22 Pennsylvania
23 Texas
24 Alaska
25 North Dakota
26 Georgia
27 Montana
28 South Carolina
29 New Hampshire
30 Idaho
31 Washington
32 North Carolina
33 Maine
34 Virginia
35 Maryland
36 Missouri
37 Oregon
38 Kansas
39 Massachusetts
40 Iowa
41 D.C.
42 Connecticut
43 Wisconsin
44 Illinois
45 Nebraska
46 Minnesota
47 New Jersey
48 Rhode Island
49 Vermont
50 New York
51 California
In addition, it may be helpful to know a little more about State money management and State fiscal responsibility. The following is a list of State budget deficit shortfalls projected for FY 2011 and 2012.
Data acquired from cbpp.org
States with the worst budget deficit 2011
(shortfall as percentage of budget)
Nevada (55%)
Illinois (40%)
New Jersey (38%)
Arizona (37%)
Maine (35%)
North Carolina (31%)
Vermont (31%)
Connecticut (29%)
New Hampshire (27%)
South Carolina (26%)
States with the worst budget deficit forecast 2012
(shortfall as percentage of budget)
Nevada (45%)
Illinois (45%)
New Jersey (37%)
Texas (32%)
California (29%)
Minnesota (25%)
Oregon (25%)
Louisiana (22%)
Connecticut (21%)
North Carolina (20%)
Now that we know who the worst State budget offenders are, let’s see which states do better with their fiscal management and have the smallest budget deficit, if any.
States with the least budget deficit 2011
Alaska (no deficit)
Alabama (no deficit)
Arkansas (no deficit)
North Dakota (no deficit)
Wyoming (no deficit)
Indiana (2%)
Montana (4%)
West Virginia (4%)
Iowa (6%)
Massachusetts (6%)
There is an alternative way to look at this data. If you are a single mother or otherwise simply want to live on the dole then you choose a state on the far right of your chart. Obviously the total tax “take” is redistributed to the lazy indolent freeloaders.
The figures concerning Alaska are just not correct; as a resident, I know. First of all, the state has no state sales tax, but does allow local governments to impose limited sales taxes. Only the smallest towns typically impose the maximum rate. Anchorage, the largest city, has 0%…a car with a $30,000 sticker price costs….$30,000. Also, it is possible to live in certain areas of Alaska without paying ANY property tax on your home, as property taxes are imposed by borough or municipal governments only. Finally, your calculation does not take into account the annual disbursement of the Permanent Fund Dividend to every man, woman and child by the state. The PFD is a dividend paid out from the oil tax trust fund. Last year, a family of four got $5200 ($1300 x4) in October, subject only to federal income tax. The PFD will usually easily offset the cost of local property taxes for most Alaskans, with money left over. The NET result (no sales tax for most residents, no income tax and the local property taxes offset by the PFD) places Alaska clearly in FIRST place when it comes to figuring out the state with the lowest tax burden, with many residents actually MAKING money when you add it all up. No other state even comes close.
Thanks for the clarification regarding Alaska. Sounds like it’s a #1 when considering low or no taxes.
In olden days comparing sales, income and property taxes was a reasonable way to determine the tax burden in a state. However states realize that raising these taxes creates a big uproar so many have taken to raising their income by imposing other taxes and increasing “fees”. It becomes nearly impossible to calculate how much the state is taking from you because of this. Where I live they imposed a new “flush” tax (which is getting ready to be doubled), they tax every bottle (water, soda, etc.)(this is not a deposit – there is no way to get it back), they have an added tax on snacks, cigarette tax, alcohol tax, driver’s registration and tags have doubled, fuel tax may double, tolls have been raised and the doubling of these is scheduled to phase in, licensing fees for game machines went from $150 to $1000 per machine per year… the list goes on and on and on and on…. You can see how difficult it becomes to calculate your true tax burden and why citizens and businesses are collapsing under the weight of these taxes.
you must be living in the communist state of maryland…as do i
As do my family and I. That’s actually what led me to this article — with the latest round of tax hikes, we’ve had more than enough and are searching for a less oppressive place to live. We’re sick of working to support all the freeloaders here — time to vote with our feet and get out of this commie rat hole.