Where You'll Pay the Most in State and Local Taxes
Some states have high sales taxes and property taxes, but no income taxes. Other states have no sales taxes but high income taxes. Overall, taxes at both the state and local level can dramatically impact the cost of living for consumers. The listing of state taxes below can give you an idea of how the highest and lowest states rank.
State Sales Taxes
Sales taxes are the percentage you pay over and above a sales price when you purchase certain items. Most states rely heavily on these taxes to make their fiscal ends meet. Keep in mind, too, that municipalities and counties sometimes have their own sales taxes in addition to those charged at the state level—and that all of these can be on top of any local sales tax. The Tax Foundation, a leading source for tax information, provides comprehensive annual rankings based on various taxes overall.
According to the Tax Foundation, the states with the highest combined sales taxes at state and local levels as of 2020 are: Tennessee (9.53 percent), Louisiana (9.52 percent), Arkansas (9.47 percent), Alabama (9.22 percent), and Washington (9.21 percent).
The states with the lowest combined sales taxes are Alaska (1.76 percent), Hawaii (4.44 percent), Wyoming (5.34 percent), Wisconsin (5.46 percent), and Maine (5.5 percent).
Seven states decline to tax residents' incomes as of 2018: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee tax only interest and dividend income—you can keep your earned income, tax-free.
At the other end of the scale are states with walloping tax rates at the highest income levels.
The top three states by income tax rate in 2020 are California (13.3 percent), Hawaii (11.0 percent), and New Jersey (10.75 percent).
You'll note that none of these states also make the list for the highest state and local sales taxes, so residents do receive a little bit of a break there.
Property Tax Rates
Property taxes are generally imposed at the local level. New Jersey municipalities are known for having the highest property taxes, and Louisiana has the lowest as of 2020.
Putting It All Together
These lists don't overlap, and they only report the highest and lowest states in each category. But consumers will find that the majority of states in the Union charge income taxes along with hefty additional state and local taxes. Comprehensively looking at each of these categories for your individual situation can certainly keep you informed on your own obligations and may greatly help to potentially influence the state in which you plan to live.
Some Other Things to Think About
Overall, combined taxes are tracked by the U.S. Census Bureau, which generally looks at taxes as a percentage of revenue. As of the first quarter of 2020, combined tax revenues for property, sales and gross receipts, and income taxes was $401.8 billion across the U.S.
Each state has a unique mix of taxes that affect both residents and non-residents. This makes creating a comprehensive ranking of overall tax burdens an even more difficult undertaking and one that can be looked at in several ways. The U.S. Census Bureau’s quarterly data report helps provide insight on total tax revenue which takes into account taxes paid by residents and non-residents.
The Tax Foundation generally provides data by rates. Each provides a unique angle as it can be important to consider taxes as they contribute to state revenue budgets as well as taxes that affect local consumers.
Legislative Analysts Office. "Understanding California’s Sales Tax." Accessed June 30, 2020.
Tax Foundation. "State and Local Sales Tax Rates, 2020." Accessed June 30, 2020.
Tax Policy Center. "State Individual Income Tax Rates 2000-2020." Accessed June 30, 2020.
Tax Foundation. "State Individual Income Tax Rates and Brackets for 2020." Accessed June 30, 2020.
Tax-Rates.org. "Property Taxes By State." Accessed June 30, 2020.
U.S. Census Bureau. "Quarterly Summary of State and Local Government Tax Revenue for First Quarter 2020," Pages 1-2. Accessed June 30, 2020.
U.S. Census Bureau. "Who Is Included in the Resident Population Counts?" Accessed June 30, 2020.