A new analysis reveals dramatic disparities in the total tax burden shouldered by residents across the United States. According to a study by personal finance website WalletHub, the share of personal income paid in state and local taxes ranges from 4.92% in Alaska to 13.30% in New York.
The study, which utilised data from the nonpartisan Tax Policy Center, calculated the tax burden for all 50 states by combining property, individual income, and sales and excise taxes as a percentage of personal income. "It's easy to be dismayed at tax time when you see just how much of your income you lose," WalletHub analyst Chip Lupo stated. "Living in a state with a low tax burden can alleviate some of that stress."
The Methodology Behind the Rankings
WalletHub's ranking is based on the concept of 'tax burden' rather than just tax rates. This measure compares the total taxes collected by state and local governments to the aggregate personal income of the state's residents, providing a clearer picture of the financial impact on the average person. The data sources ensure a standardised, nonpartisan comparison across state lines.
The study highlights that nine US states levy no state income tax at all, a significant factor in their overall ranking. Conversely, states like California have top marginal income tax rates as high as 13.3%, according to the Tax Foundation.
Top and Bottom of the Tax Burden Scale
Alaska claims the lowest total tax burden at 4.92%, comprised entirely of property taxes (3.32%) and sales/excise taxes (1.60%), with a 0% income tax burden. It is joined at the lower end by states like Tennessee (6.21%), Florida (6.27%), and New Hampshire (5.38%), which recently repealed its tax on interest and dividend income.
At the opposite extreme, New York residents face the nation's highest burden at 13.30% of their income. This is driven by significant sales and excise taxes (7.48%) and a substantial income tax burden (3.20%). Hawaii (12.39%), Vermont (11.10%), and Maine (10.75%) also rank among the states with the heaviest tax loads.
Breaking Down the Tax Components
The report provides a detailed breakdown for each state, showing how different tax types contribute to the total. For example, while Texas has no income tax, its total burden of 8.47% comes from relatively high property and sales taxes. In contrast, Oregon, with no state sales tax, has a 9.46% burden heavily weighted toward income tax (4.76%).
Five states—Alaska, Delaware, Montana, New Hampshire, and Oregon—do not impose a state-level sales tax, though local sales taxes may still apply in some, like Alaska.
Implications for Residents and Policy
The findings have direct implications for household financial planning and state policy debates. The stark differences underscore how location significantly affects disposable income. Policymakers often balance tax rates against public service provision, with higher-burden states typically funding more extensive services.
As state legislatures review their fiscal policies, studies like this provide critical data for discussions on tax reform, economic competitiveness, and the trade-offs between revenue collection and resident affordability.