Paul L. Caron

Friday, August 8, 2008

Ten Highest and Lowest Tax States

The Tax Foundation has released State-Local Tax Burdens Dip As Income Growth Outpaces Tax Growth, which computes each state's combined state-local tax burden, taking into account taxes paid out of state.

Here are the ten highest tax states:

  1. New Jersey:  11.8%
  2. New York:  11.7%
  3. Connecticut:  11.1%
  4. Maryland:  10.8%
  5. Hawaii:  10.6%
  6. Caifornia:  10.5%
  7. Ohio:  10.4%
  8. Vermont: 10.3%
  9. Wisconsin:  10.2%
  10. Rhode Island:  10.2%

Here are the ten lowest tax states:

  1. Alaska:  6.4%
  2. Nevada:  6.6:
  3. Wyoming:  7.0%
  4. Florida:  7.4%
  5. New Hampshire:  7.6%
  6. South Dakota:  7.9%
  7. Tennessee:  8.3%
  8. Texas:  8.4%
  9. Louisiana: 8.4%
  10. Arizona:  8.5%..

From the report:

For 18 consecutive years the Tax Foundation has published an estimate of the combined state-local tax burden shouldered by the residents of each of the 50 states. For each state, we calculate the total amount paid by the residents in taxes, and we divide those taxes by the total income in each state to compute a "tax burden" measure.

Tax Foundation rankings are sometimes confused with rankings based on Census Bureau's tallies of state and local tax collections. The difference is out-of-state tax payments. When state and local governments collect large amounts from non-residents, whether as tourists, commuters, businesses or property owners, Census counts those payments in the collections of the taxing state; the Tax Foundation study counts them in the residential state of the taxpayer.

Update:  For criticism of the Tax Foundation and its methodology, see Center on Budget and Policy Priorities, Caution: The Tax Foundation's State and Local Tax Rankings Are Unreliable.

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