States with the Highest (and Lowest) Tax Burdens

By on October 23, 2012 in News, Retirement

If you are planning on retiring soon and relocating to another state, you may want to pay attention to which states have the most friendly tax climates for their residents. Presumably, anybody relocating in retirement is seeking a lower cost of living and better weather.

So how do the states’ tax burdens stack up? A recent study from the Tax Foundation looked at what states had the highest and lowest tax burdens in FY 2010. New York had the highest taxes while Alaska lays claim to the lowest.

How do the other states compare? The table at the end of the article shows the complete rankings.

The Annual State-Local Tax Burden Ranking report estimates the average total tax burden for residents of each state, including both the in-state taxes they are subject to as well as taxes they pay to other states, such as those paid by virtue of working in, traveling to, or buying products from other states.

The nation as a whole paid 9.9% of its income in state and local taxes in 2010, the most recent year for which data are available. That percentage is consistent with the total from 2009 but down significantly from 10.3% in 1977, the earliest year for which the Tax Foundation has done such estimates.

“Some states are able to shift significant portions of their tax burdens to nonresidents, with Alaska being the most aggressive. The Last Frontier is able to export over 75 percent of its tax collections to residents of other states, by virtue of taxes on oil extraction,” said Tax Foundation economist Elizabeth Malm. “Resource-rich states, such as Alaska and Wyoming, are only the most dramatic examples of tax exporting. Major tourist destinations like Nevada and Florida are able to lower residents’ burden by taxing tourists, who are often nonresidents. Nationwide, over a quarter of all state and local taxes are collected from nonresidents.”

Table 1. State and Local Tax Burdens by Rank – Fiscal Year 2010
State State-Local Tax Burden Rank
U.S. Average 9.9%
New York 12.8% 1
New Jersey 12.4% 2
Connecticut 12.3% 3
California 11.2% 4
Wisconsin 11.1% 5
Rhode Island 10.9% 6
Minnesota 10.8% 7
Massachusetts 10.4% 8
Maine 10.3% 9
Pennsylvania 10.2% 10
Illinois 10.2% 11
Maryland 10.2% 12
Vermont 10.1% 13
Hawaii 10.1% 14
Arkansas 10.0% 15
Oregon 10.0% 16
North Carolina 9.9% 17
Michigan 9.8% 18
West Virginia 9.7% 19
Ohio 9.7% 20
Nebraska 9.7% 21
Kansas 9.7% 22
Indiana 9.6% 23
Iowa 9.6% 24
Idaho 9.4% 25
Kentucky 9.4% 26
Florida 9.3% 27
Washington 9.3% 28
Utah 9.3% 29
Virginia 9.3% 30
Delaware 9.2% 31
Colorado 9.1% 32
Georgia 9.0% 33
Missouri 9.0% 34
North Dakota 8.9% 35
Oklahoma 8.7% 36
Mississippi 8.7% 37
Montana 8.6% 38
New Mexico 8.4% 39
Arizona 8.4% 40
South Carolina 8.4% 41
Nevada 8.2% 42
Alabama 8.2% 43
New Hampshire 8.1% 44
Texas 7.9% 45
Wyoming 7.8% 46
Louisiana 7.8% 47
Tennessee 7.7% 48
South Dakota 7.6% 49
Alaska 7.0% 50
Dist. of Columbia 9.3% (31)
Notes: As a unique state-local entity, D.C. is not included in rankings, but the figure in parentheses shows where it would rank. The local portions of tax collection figures for fiscal year 2010 rely on projections of local government tax revenue.

Sources: Tax Foundation calculations using data from multiple sources, primarily Census Bureau, Rockefeller Institute, Bureau of Economic Analysis, Council on State Taxation, and Travel Industry Association.

© 2016 Ian Smith. All rights reserved. This article may not be reproduced without express written consent from Ian Smith.

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Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce. Ian also has a background in web development and does the technical work for the FedSmith.com web site and its sibling sites.

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  1. G7777777 says:

    The information in this article is for the general population and can be found elsewhere. Could FedSmith please do an analysis that is specifically for Federal employee retirees? (E.g., look at taxation on our FERS, TSP, SRS, etc.) Also give information such as the base retirement income, assumed property value of retirement home, assumed yearly spending that is subject to sales tax. We need to know those three values in order to see how you’re computing the income, property, and sales tax that feed into the ranking. What would be fantastic is a table listing those 3 tax rates for each state. Those rates are extremely important if anyone is going to apply this info to their retirement. If you retire in New Hampshire in a modest home (e.g. $200K) then this ranking makes sense. If you retire in New Hampshire in a large property (e.g., $500K), the ranking for New Hampshire slips further down in ranking.

  2. John Sharp says:

    I don’t understand how PA can be 10.2% when they don’t tax retirees on any income; not from TSP, IRA, SS or pensions.

  3. Panther! says:

    Isn’t it interesting. The states with the highest tax burdon are party affiliated Democratic. Interesting!

  4. Randgmw says:

    New York State is at the top of the list, but I understand they do not require Government pension holders to pay state income tax. Was this “discount” taken into account when computing the 12.8% for NY?

  5. Retired Fed says:

    How about checking the cost of living?  Alaska may have the lowest tax burden, but isn’t food and merchandises more costly there?

    • OldRet says:

      Absolutely. I was stationed there in the military and they give you a cost of living supplement in addition to your regular pay.

  6. 1Lcrewlowe says:

    It would help to know which states have an annual luxury tax or similar on things like vehicles.  Not sure how this works, but a friend in Virginia pays an “annual tax” equating to a percentage of the vehicles value.  Does that sound correct?  I’m about an hour south of NY City and approaching retirement.  We’d love to settle in VA or MD, but need a good source for the particulars.

    • OldRet says:

      Check out “Where to Retire” magazine! You can also order back issues with areas you are considering.

      http://www.wheretoretire.com/

    • NoDonkey says:

      In Virginia, if your car is worth more than $20K (I think), you have to pay additional fees annually to register it.  My car was worth so little, it never affected me.  But it can add up if you own expensive cars. 

  7. Realtat says:

    Some hidden taxes have not been included here.  In Reno, Nevada, water bills can be huge and when I investigated I found out that over half of my water bill went to pay off old government debt. When monthly water bills approach $600 for a half acres suburban home, the tax rate above seems irrelevant. Of course, there are many people who get special consideration and do not have to pay this tax.  

  8. Roger Porzig says:

    One thing almost everyone has lost sight of is: It takes taxes to have a civilization!  Here, in Florida, as well as many places it all about “lower my taxes”!  That leads (here in FL) to cutting firemen, policemen, hours the library is open, potholes, no grass mowing along highways and on and on.  Without taxes we are headed back to the dark ages.  I look forward to leaving this state to another (with a little higher tax rate) to enjoy life.

    • OldRet says:

      The are actually some places along state borders where you can move that one state has no income tax on pensions and the other state has no sales tax. I believe Washington/Oregon and PA/Del fall into that category. Live in the no income tax state and shop in the no sales tax state! Do some research as their may be others.

      • D Byte says:

        The ferry is expensive to visit Delaware from PA

      • contspec says:

        When I retire, I will continue to live in PA because my family is here.  PA doesn’t tax your pension.  The only income taxes I will be paying is 3.08% on investments, capital gains, interest.   The biggest tax is property taxes and I pay roughly $3,500 per year.  The real downfall for PA is the inheritance tax which is 6%. 

         A lot pof people from Maryland and New Jersey shop for clothing in PA because it is not taxed nor is food.

        • Looey says:

          Our property taxes are over $5,000, and some of the new houses here are paying over $8,500. Retirees can’t afford to have their taxes go up every year. It’s hard to leave family, but we can move to the south where more family live.

          • contspec says:

            PA does have a nice teacher’s unions and most of your property taxes goes for the schools. We have more teacher strikes than the rest of the country combined. There is a neighboring school district that has plenty of businesses and their taxes are lower than mine. I have thought about moving into that school district but where I’m looking, the HOAs would eat up the difference in the taxes and I’m not sure I would like all of the HOA requirements.

            PA does have its problems. We have to go the state stores to buy wine and spirits. Beer distributors to buy a case of beer and to a bar to buy a six pack of beer. Governor Pinchot put the screws to the residents and the lousy politicians in Hbg cant privatize the state stores. Probably because of the unions.

      • Lazarusseven says:

        does NH tax pensions?

      • Looey says:

        Yes, PA and DE meet those requirements. I live in PA and we pay no tax on anything considered retirement income: pensions, annuities, IRA withdrawals, and we have a flat income tax of approximately 3.08 percent. However, our property taxes are terrible in any growth area of PA, of which there aren’t too many, but the county I live in is one of them. The big driver are the school taxes, which pay the high salaries and benefits of teachers. PA has also just passed a transportation bill which will raise the cost of gasoline and the cost of registering your car every year.

        Delaware has no sales tax, and very low property taxes, but they do have a graduated income tax. So pick your poison.

        We, personally, are looking to move south with the better weather, and lower taxes. We are looking at Florida and Georgia, but moving more toward Georgia as we lived in Florida many years ago.My niece lives in Cherokee County, Georgia, and when you are 62 there, you don’t pay any more school taxes. I would rather be taxed on my income than my home. I am fed up with paying for teacher’s pensions and healthcare that I don’t have based on my home’s value. In some areas here in PA, people are paying $12,000 in taxes on their homes.

        • OldRet says:

          Watch out for Florida. No state income taxes but property taxes can be high. Fortunately right now housing prices are fairly cheap thus keeping property taxes lower. A lot of retired people there live in mobile homes or manufactured homes which keeps the price of the home and the taxes lower. Check out Tennessee also. No state income taxes and property taxes are reasonable. Local taxes can be high though.We were looking at Tellico Village and Fairfield Glade.

    • Motoman172 says:

      That is not true Roger…. We didn’t always have an income tax in this country… We could tariff imports to cover the costs and what is wrong with private industry creating roads?

      The Boston tea party was over a 2% tax on tea… The declaration of independence was written following a 3% tax on sugar… Most of us are paying 40-60% of our hard earned money in federal, state, local and other misc taxes… how much is too much? According to you and Obummer it’s never enough…. Now the self responsibility of providing health insurance is a TAX… a tax that healthy young people cannot afford… But just like the deficit, Social Security, Medicaid  and bombing brown people we don’t care how much we take and tax from our youth… The future of this country, our children and young people are a punch line and an apparent endless supply of federal, state and local revenue….. 

      • Fed Up! says:

        The key word you seem to miss Motoman is “civilization”.  Yes, at one time we didn’t have income tax.  That was the 19th century.  You had one sheriff in Dodge City, few roads, and fewer bridges.  Chicago burned to the ground and cholera was everywhere because there were no sewers or clean water,  dead horses laid in the streets of NYC and children worked in industrial mills and slaves picked cotton and every other dirty job for their Masters.  It was such a wonderful time for all that life expectency was about 30.  But hey, no one paid income tax and the few super wealthy  had more to take with them.  

    • Boghie says:

      One thing almost everyone has lost sight of is: It takes taxes to have a civilization!  Here, in Kalefornea, as well as many places it all about “lower my taxes”!  That leads (here in CA) to cutting firemen, policemen, hours the library is open, potholes, no grass mowing along highways and on and on.  Without taxes we are headed back to the dark ages.  I look forward to leaving this state to another (with a little higher tax rate) to enjoy life.
      Roger, come enjoy Kalefornea.  We have the fourth highest state tax burden and cannot find the assets to pay for firemen, policemen, library hours, pothole fixing, mowing the medians, etc..

      We never seem to lower our taxes.  But, our politicians (as an extension of ourselves I guess) can spend every dime and a significant pile more.  We haven’t balanced a budget since the 90s.

      In fact, we are the second brokest state in the union!!!  We are racing Illinois for the dumpster.  Tell me how having high taxes is helping my family enjoy our life?

  9. Anonymous says:

    I think this table from the Tax Foundation is misleading.  They should include property taxes and sales taxes.  There are some states which don’t have any sales tax and others that don’t tax food+medicine.  It would be better to have a table that showed the major localities for each state and the relative tax burden in that locality.

    • The Master says:

      This information is all taxes, including sales tax and property tax.

    • OldRet says:

      …and there are some states that have income taxes that tax Federal pensions and some states with income taxes that don’t tax Federal pensions. I doubt very much that this table takes that into account. Like I said in a previous post, “Do your own research”.

    • Guest says:

      While the Tax Foundation table includes property and sales taxes (plus some measure of income taxes paid to other states), it does this as an aggregate of all personal taxes paid divided by the state’s total income.   But comparing  that to amount you would pay as an individual would not be easy using only the Tax Foundation’s information.  For example, the TF shows rates for states which have graduated income tax rates, but does not indicate at which income levels each rate clicks in (for some states, the top rate begins at $3,001, for others, at $200,000).

      In addition, the TF shows some bias in its discussion of the breakdown of taxes for each state.  As an example they state that Ohio has a “complex” personal income tax system and “Ohio levies a 5.5% general sales or use tax on consumers, which is below
      the national median of 6.00% [but localities are permitted to levy
      their own high sales taxes]”.  Having filed Ohio taxes for years, they were not that hard and had tables(!!!) one could use if you didn’t want to do some algebra.  And the highest sales tax rate is 6.75% (not all that high compared to other states).  Plus, they do not note if sales tax applies to food or other essentials.

      At least they do admit that they do not attempt to determine the value of government services.

      Given that not everyone spends like the “average person” (and since something like 5% of the population is responsible for about 30% of consumer spending, few of us are the “average”), it is hard to estimate one’s potential sales tax burden using TF averages.  And the variation in rates, property values, etc., among counties and cities in any state means that we should all plan on doing some real calculating on what our actual tax costs might be in any given state.  And while the tax rate might be low in some more rural states, with the natural gas drilling boom, living costs may be much higher than you might expect otherwise.  So using the TF information (let alone any single source) as gospel in deciding where to move would in my mind be a huge leap of faith.

    • NoDonkey says:

      I pay $7,000 in property taxes here Texas, it all depends where you live here so this is misleading.  I don’t pay income taxes, but they have to get the money some way.  I avoid the sales tax by shopping at the commissary. 

  10. The Master says:

    I find this interesting. I lived in Tennessee and in Louisiana. Sales tax was comparable and there was no income tax on regular income in Tenn. You pay up to 7% on regular income in La.

    • OldRet says:

      The lack of a state income tax and lower cost of living and looked at the Tellico Village area near Lenoir City south of Knoxville. Beautiful area along Lake Tellico and property taxes are reasonalbe. Still considering moving there.

  11. steve5656546346 says:

    This is why it is imperative that most government occur at the State or local level.  If they bankrupt themselves, the country is still in tact.  And you can leave a State.

    The Federal/national-level government is the level from which there is no appeal and even escape (moving to another country) is very complicated.

    • Management Attorney says:

      And each state’s militia decides whether to response to attacks on Americans.  Each state decides whether to secure airports with law enforcement types or convenience store clerks.  Each state balances food and other public health requirements with the desire of attracting companies with no regard for public health.  Not to mention, legalizing and selling heroin, cocaine and LSD can reduce the tax burden.  I guess we can repeal the 14th Amendment and have a race towards mutually assured self-destruction.

      • Gholf says:

        I think he said “most”, not ‘all’…reading comprehension is a lost art, everyone is looking for a fight w/o knowing facts.

      • Nameless, faceless nobody says:

        Sheesh!  Just because most day-to-day stuff was designed to be done by the states or lower does not mean that there is no need for federal government.  Problem came when fed started creeping ever more into matters better left to the states.  And if a state wants to experiment with legalized marijuana, for instance, then if that creates a miserable situation only one state is affected.  If it works out, then other states will eventually follow suit.  No matter if you agree or not, that is the situation happening with gay marriage.  But if everyone gets all jiggy with extreme situations, then of course no one will find common ground.

      • HRguru says:

        Argument ad extremis might play well with your friends, but it makes you look like a horrible attorney. So any shred of federalism and suddenly we’re a confederation? Might want to read a history book while you are at it.  

      • HRguru says:

        Also the introduction of race and the 14th amendment is pathetic and low. 

        • Management Attorney says:

          Race?  And you’re telling me to read a book?

          • HRguru says:

            Yes, read a book, and don’t bring up non sequitur arguments.  Having various tax and economic policies is the equivalent of allowing slavery again?  You sound like an hysteric.

        • Thinking American says:

          “Race” as a transitive verb, dude…

  12. Black_Diamond says:

    glad i moved from california to new mexico

  13. Sabot says:

    It’s worth noting the obvious: “Blue” states have higher tax burdens than “Red” states, so it pays to retire and live in states where the Republican party is either in control or has parity with the Democrats.

  14. Shrek3896 says:

    Interesting that the 14 highest tax burdens are in traditionally “blue” states, while in the 11 lowest tax states, nine are traditional “red states” and two are swing states.  It appears that Democrat voters must actually enjoy paying higher taxes.

    • Me says:

      And these taxes are subsidized at the federal level through the local and state tax deduction.  We’re subsidizing these policies to the tune of billions and billions of dollars.  

  15. 1EYEDJimmyBivvins says:

    Why don’t you show the states that don’t tax your pension? I don’t pay state tax on ny csrs pension in pa. Thats the biggest thing in my opinion.

    • OldRet says:

      ‘Where to Retire’ magazine is a great source for that kind of information. You still have to research on your own but they’re a good starting point. ‘NARFE’ magazine and web site also have some of that kind of information.

      http://www.wheretoretire.com/

    • guestwo says:

      Do you pay school district  AKA real property taxes?

      • OldRet says:

        Where I live total property taxes, about 80% of which are school taxes, runs about $1300 – $1400 per $100,000 of appraised value. A $300,000 home would pay about $4000 in annual property taxes. Some areas in cities can be much higher.

  16. Guest says:

    No surprise which is #1. I left NY 10+ years ago because of
    both the taxes and the Winters. The state tax rate is only the starting point.
    The counties, and the local municipalities also tax oppressively. Property
    taxes and the school taxes are staggering. No wonder the north east is losing
    population. HOWEVER, I have also experienced other imposed “fees”
    elsewhere that you might as well call a tax, and figure it into the ratings.
    Where I live now the miscellaneous “fees”, and property insurance,
    auto insurance, are pretty heavy. Property taxes are MUCH less than NY. We have
    storms, NY has storms. Bottom line – I would NOT go back to NY.

  17. OldRet says:

    This table is misleading for retirees. Bottom line is…Do your own research. I currently live in PA and was thinking of moving to South Carolina. According to this table PA is more expensive but my own research proved otherwise. SC taxes your pension and has a 6% sales tax and other local areas can add another 3%. PA exempts all Federal pensions from state income taxes and has a 6% sales tax (food and clothing not included). SC also taxes some personal property while PA does not. I calculated that a move to SC would take about $5K out of my pension right off the top just to pay the state income tax. The cost of living is slightly lower in SC and the only are where I foud it ot be cheaper was property taxes, especially if you’er over 65, and housing prices. PA was cheaper for me as long as you stay away from the bigger cities over 50K. It is cheaper to buy a house in SC. The same house in SC as PA is probably about 25-30% less but since mine is paid for in PA that wasn’t an issue with me.

    • Retired Fed says:

      How about the cost of utilities?  You must use a lot of AC during the summer months.

      • OldRet says:

        Actually it’s relatively cheap in PA. We have electric competition here. The only months the air runs most are July and August. Sep-Nov and Mar-May we don’t use much heat or air. Dec-Feb we use heat but keep it at 66-68 most of the time. Our house is all electric with heat pump and the winter months are about $250 and the summer months are about $150 with the other months cheaper than that.

        • Looey says:

          We are in PA, too using an oil burner for the really cold weather, and then it switches to a heat pump at 35 degrees. I would freeze to death if I kept my house at 66-68. We keep ours at 70 degrees in the winter

          • OldRet says:

            We’ve upped our daytime temp to 71-72 and put it down to 66 at night. With an all electric house our electric bill for October was $114 and our bill for November was $146. Pretty reasonable in my view. Water bill runs about $50/month. Sewer and trash is $138/quarter.

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