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Money Talk

Top 10 U.S States With Highest Effective Tax Rates

August 09, 2017

2 min read

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

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

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

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

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

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

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

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

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

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

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

*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.

By JuanDavid Rodriguez

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