Top 10 U.S States With Highest Effective Tax Rates

When most people think of taxes, they usually think of their income tax bracket. But depending on where you live, the percentage of your income that actually goes towards taxes may be much higher than your tax bracket.

This is known as your effective tax rate.

Below we look at the 10 U.S. states with the highest effective total taxes.

10. New Jersey

  • Effective State & Local Tax: 12.63%

New Jersey’s high real estate taxes put it in the top ten. Despite having the 11th-lowest effective state and local income tax rate of 1.40%, the ninth-lowest sales and excise tax rate of 3.51%, and no property vehicle tax, the Garden State has a real estate tax rate of 7.72%, the nation’s highest.

9. Iowa

  • Effective State & Local Tax: 12.84%

At 4.88%, Iowa has a moderately high real estate tax rate. It’s vehicle property, income, and sales and excise taxes are also in the top quartile.

8. Michigan

  • Effective State & Local Tax: 13.00%

The various components of Michigan’s  effective state and local tax rate vary a lot. Its has a relatively low sales and excise tax rate of 3.58%, and it has a vehicle property tax rate of just 0.26%. However, its real estate tax rate of  5.84% is among the highest nationally, and it has a high effective state income tax rate, of 3.32%.

7. Ohio

  • Effective State & Local Tax: 13.06%

Ohio’s real estate tax rate is 5.15%, making it the 11th-highest in the country. Its 3.34% state effective income tax rate and 4.57% sales and excise tax rate are also high. Ohio doesn’t have a vehicle property tax, however.

6. Connecticut

  • Effective State & Local Tax: 13.56%

Connecticut’s real estate tax and vehicle property tax are among the highest in the nation, at 6.48% and 1.02% respectively. However its sales and excise tax and income tax rates are average.

5. Rhode Island

  • Effective State & Local Tax: 13.57%

Rhode Island’s real estate tax rate is slightly lower than Connecticut’s, while its income and sales and excise taxes are slightly higher. Rhode Island vehicle property tax of 2.03% is the highest in the nation.

4. New York

  • Effective State & Local Tax: 13.58%

The Empire State is an expensive place to live, especially in the Big Apple, and its high real estate, income, and sales and excise tax rates put it near the top of the list list. It also has the highest cigarette tax and one of the highest gasoline taxes in the country. New York City residents carry an even greater tax burden, paying city taxes in addition to federal and state taxes.

3. Wisconsin

  • Effective State & Local Tax: 13.60%

Wisconsin has no vehicle property taxes, and its sales and excise tax rate of 3.60% is comparatively low. However, its real estate and income tax rates are the fourth and ninth highest in the U.S. respectively.

2. Nebraska

  • Effective State & Local Tax: 13.80%

Nebraska,  the Western-most state on this list,  also bucks a national trend.  Most red states tend to have lower taxes, but Nebraska has the second-highest effective total state and local tax in the country.

1. Illinois

  • Effective State & Local Tax: 14.76%

Illinois’ effective state and local tax rate is nearly a full percentage point higher than Nebraska’s, even though it doesn’t have a vehicle property tax.  Its real estate taxes are the second-highest in the country, while both its sales and excise and income taxes also rank in the top 50%.

Read more: Tax Season Cleanup: How to Make a Fresh Start for 2018



Footnotes
*Methodology: The following information is derived from a 2017 WalletHub survey ranking states by their total effective tax rates at the state and local level. The report compares real estate, income, vehicle property, and sales and excise from each state. For those rankings, WalletHub used data from its own research, along with data from the U.S. Census Bureau, The Tax Foundation, American Petroleum Institute, Federation of Tax Administrators, National Automobile Dealers Association, and the Department of Motor Vehicles for each state. The effective tax rates listed are based on a U.S. median household income of $54,286, a car valued at $23,070, a home worth $178,600, and annual spending equal to the average spending of a median U.S. income household, which is $54,286.




Disclaimers
This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit www.stashinvest.com/disclosures.