Which State Has the Highest Tax Burden?

Moving costs can certainly add up quickly. However, when the movers have been compensated and the down payment or deposit has been paid, those who have moved across state lines may find the longer-lasting financial impact comes in the form of taxes. Moving from one state to another could cost or save homebuyers an average of up to $7,760 in taxes, and that’s not a one-time fee. That’s how much more would be owed or retained each year, according to a new study by Hire a Helper.

Hire a Helper reviewed income, sales, and property taxes in all 50 states and the District of Columbia to determine the effective tax rate in each state. They then calculated a total local tax burden based on the median wage for each respective state.

The highest total local tax burden is in the District of Columbia, where an average wage earner would spend about $9,730 in taxes per year. At the other end of the spectrum, Tennessee has the lowest local tax burden with an average wage earner spending about $1,970 per year. The difference is that $7,760, which is the highest average tax cost or savings between any two states.

These compare to a national average of $4,066 per year in taxes. Income tax makes up the largest portion of this total at $1,655, followed by property taxes, which average $1,538 per year nationally.

With state income tax claiming a major portion of total tax burden, it is no surprise that most of the states with the lowest total tax burdens were the same states that have no state income tax.

“If you want a low tax bill, a smart strategy to get one might be to move to one of the nine states that levy no state tax on earned income,” according to Hire a Helper.

The states that do not charge state income tax are: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Of these, the only one that did not land a spot on the list of 10 states with the lowest tax burden is New Hampshire.

Following Tennessee with an average annual tax burden of $1,970, the states with the lowest tax burden are Nevada ($2,002 per year), South Dakota ($2,112 per year), Florida ($2,131), and Alaska ($2,274).

The states with the highest tax burden following the District of Columbia with $9,730 are New York ($7,170), Connecticut ($6,782), Massachusetts ($6,368), and Illinois ($5,875).

Hire a Helper also calculated an average effective tax rate for each state. The average effective tax rate for the nation is 8.2 percent of annual income.

New York had the highest effective tax rate at 11.9 percent, followed by the District of Columbia and Connecticut both with an effective tax rate of 11.4 percent, Illinois at 11.2 percent, and Massachusetts at 10.3 percent.

Alaska has the lowest effective tax rate at 3.9 percent, followed by Nevada at 4.4 percent, Tennessee at 4.5 percent, Florida at 4.8 percent, and Washington at 5.0 percent.

To view the average tax burden and effective tax rate for each state, view Hire a Helper’s full report here.