By Amanda Weiss
Finances play a far more significant role in our lives than we often want them to. Along with the expenses of buying the items we need, taxes are an unavoidable cost. There are taxes on everyday products, housing, property, and more. Depending on your geographic location, the amount you will owe in taxes can vary. Taxes, in particular, vary between different states. In many cases, areas that are very attractive in some respects have unreasonable taxes, and this can affect where you choose to live. Whether you are first looking to settle down or searching for a retirement spot, consideration of taxes is important. These, according to the Tax Foundation, are the 11 worst states in the US for high taxes.
1) New Jersey
The worst state to live in based on taxes alone is New Jersey. The amount of income tax you will pay as a New Jersey resident can vary widely. In fact, people pay anywhere between 1.4% and 8.97%. The sales tax applied to products and services is 7%. New Jersey is also known for its extremely high property taxes. On average, a homeowner pays $8,500 in a year as property tax. For all residents overall, the per capita yearly amount is almost $3,000. Property taxes are this high because the state is densely populated and these taxes pay for local government expenses. Additionally, public education in New Jersey is very expensive, and property tax funds pay for it. The high taxes in the state also contribute to the pension system, since it is consistently underfunded.
2) New York
New York is well known for its high taxes, especially in and surrounding New York City. As an individual resident, you can expect to have to deal with an income tax between 4% and 8.82%. If you are unable to get a job and must file for unemployment benefits, you will face an unemployment insurance tax ranging from 1.70% up to 9.50%. One of the most significant, and worst, taxes you will face as a New Yorker is property tax. Per capita, property tax is almost $2,500 annually. Per household, it averages around 13% of total income. In fact, some people choose to move away because they are unable to afford these taxes. They tend to run so high for several reasons. New York spends 85% more per student on public education than the national average. Tax caps have been put in place by government officials to avoid large percentage increases from year to year.
Among the highest-taxed states in the nation is California. Individual income tax has a huge range, depending on how much money you bring in. It starts as low as 1% and reaches over 13% as your income approaches or exceeds half million dollars per year. There are some state tax credits you may qualify for, but many federal deductions are not applied in California. Sales tax in this state is also high, at 7.50%. Property taxes also contribute to the high cost of living. Over the last year, the per capita property tax was $1,365. Unfortunately for tax payers, the homeowner and rental assistance program that reimbursed some of their property taxes is no longer in place. However, there is a cap such that these taxes cannot increase by more than 2% from year to year.
For those considering settling in New England, it may be useful to know that Vermont has high taxes. There is quite a range for individual income tax, spanning from 3.55% to 8.95%. The percentage you will owe depends on how much income you earn. The highest tax bracket applies if you make at least $411,501 in taxable income. The sales tax sits at a solid 6%. Over the last 5 to 6 years, taxes and associated fees in Vermont have increased by over $640 million, which is an increase of nearly 25%. Per capita, the property taxes are $2,331. These taxes go towards education and municipal needs. Vermont also does have its own estate tax, separate from federal taxes. If the value of a deceased person’s property exceeds $2,750,000, a tax ranging from 0.8% to 16% will be applied.
Though much of Minnesota’s land is rural in nature, the state overall unfortunately has high taxes. Income taxes especially pose a large burden to residents. Individual income taxes range from 5.35% to 9.85%. Corporate income taxes are 9.8%. Between the 2009-2010 year and the 2013-2014 year, Minnesota rose from eighth highest income tax state to fourth. Additionally, this state’s income tax is consistently higher than those of its neighboring states. In fact, the burden of income tax is one of the major reasons that Minnesota has a spot on this list. High income taxes have caused many big salary earners to leave the state. This has significantly lowered the economy’s income. As a result, Minnesota is currently viewed as a less than ideal place to settle. The sales tax here is also somewhat high, at 6.875%. The property tax is $1,547 per capita.
If you are hoping to avoid paying high taxes, Ohio is likely not the state for you. What makes Ohio among the worst states tax-wise is its high property tax. Effectively, the tax rate is 1.68% on average, and the per capita cost is $1,215. In urban areas such as Dayton, however, property tax more often averages at $2,730 for single family homes. The high property taxes can be a deal breaker for people looking to settle in an otherwise affordable state for housing. The individual income tax is not as high as some others on this list, but still does approach 5% for some people. The sales tax that is applied to many everyday goods and services sits at 5.75%. Additionally, the cost of unemployment insurance tax has quite a range. You may pay anywhere from 0.30% to 8.70% for this expense.
7) Rhode Island
For such a small state, Rhode Island has a surprisingly large tax burden for its residents. Individual income tax, though not the highest among the states on this list, is still substantial, at 3.75%-5.99%. The sales tax you will pay on items and certain services here is a somewhat hefty 7%. What really supports this state’s place on this list, however, is its expensive property taxes. Per capita, the cost of property tax is $2,282. The money from this tax goes towards schools, police and fire departments, and other municipal needs. Rhode Island is rich in these beneficial resources, but is unfortunately also saddled with high costs as a result. The unemployment insurance tax you can expect to pay may also be high. This tax can range from 1.90% all the way up to 9.79%.
Though you may want to settle in the northeastern US, Connecticut isn’t the best choice in terms of taxes. If you live here, you can expect your individual income tax to range from 3%-6.99%, depending on your income. Corporate income taxes are higher, at 9%. Therefore, if you run a business, you should consider this expense. Property taxes in Connecticut are also very high, at $2,726 per capita. According to the Tax Foundation of Washington, in 2016, almost 5 months’ worth of residents’ pay went to the government. The state does have good public schools and many manufacturing and technology jobs, as a result of these taxes. However, for incoming residents, the costs may count against living in Connecticut. Sales tax here is about on par with other states on this list, at 6.35%.
Maryland, right near the nation’s capital of Washington D.C., has been ranked as having a high tax burden. As is widely seen, there is some variety in individual income tax rates depending on amount of income. In Maryland, you may pay between 2% and 5.75% of your income for this tax. Businesses face higher tax rates, as the corporate income tax sits at 8.25%. Since many areas in Maryland have high-value properties, property tax expenses tend to be high. Even though the percentage is lower than the national average, the per capita cost is still $1,504. When you spend money on the goods you need and want, you will face a sales tax of 6%. There is also a wide range of what you may have to pay for unemployment insurance taxes. These amounts range from less than half a percent to 7.5%.
The southernmost state on this list, Louisiana, has taxes that, though not as high as some others, are still hefty. The individual income tax varies from 2% for low income earners to 6% for high income earners. Corporate income tax encompasses a slightly higher range, from 4% to 8%. The sales taxes in this state tend to be unfortunately high. While the state tax itself is only 5%, the average combined local and state tax is 9.98%. The 4.98% average local tax is the second highest average in the country. Since sales tax is applied to many of the purchases you make throughout your life, these taxes add up. Luckily, property taxes are not as high as other states on this list. Per capita, property tax falls at $849. Overall, taxes have been increased in recent years to keep up the quality of education and hospitals.