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Overall Tax Burden Varies Widely By State, Study Finds

With federal Tax Day approaching on the oddly late date of April 18 this year, it can be easy to forget that Uncle Sam only represents a small chunk of the average person’s overall tax burden. Depending on where you live, state and local income, sales, and property taxes could take up a bigger piece of your annual tax pie — or none at all.

According to a study by the personal finance website WalletHub, New Yorkers face the highest overall tax burden as a percentage of income when sales, income, and property taxes are combined, with a total bill of 12.94%. Hawaii takes the number-two spot, followed by Vermont, Maine, and Minnesota.

On the flip side, Delaware residents had the lowest overall tax burden, followed by Alaska, Tennessee, Oklahoma, and New Hampshire.

Unsurprisingly, many of the states with the lowest tax burdens have little to no income tax at all, including the known tax havens of Florida and New Hampshire. But states that don’t tax income still need to raise revenue for public services and other expenditures from somewhere: For instance, New Hampshire residents also paid the highest property taxes as a percentage of total income, with the income tax-free state of Alaska taking fourth on that list. 

Residents of Oklahoma paid the lowest proportion of their incomes to  property taxes, followed by Alabama, Arkansas, Delaware, and North Dakota. 

Also somewhat predictably, residents of “red” states had lower overall tax burden than their “blue-state” counterparts: States that went for the GOP’s President Trump in the 2016 election had an average rank of 30.27, while states that cast their lot for Democrat Hillary Clinton had an average burden rank of 18.30.

Those statistics mirror longstanding patterns on the federal level, which show that states with lower tax burdens tend to rely more on assistance from the federal government. Despite ranking number-one in tax burden, New York only came in 24th place when the Tax Foundation ranked states by federal aid receipts back in fiscal year 2014, using Washington’s money for 32.8% of its total revenue. Hawaii ranked 46th in the Tax Foundation study, deriving just 24.8% of its money from Uncle Sam.

The math isn’t quite precise, as Delaware ranked low in both the WalletHub and Tax Foundation studies — 50th and 46th, respectively — but “red” states generally use a higher proportion of federal funding in their budgets: Mississippi, Louisiana, Tennessee, Montana, and Kentucky account for the top five states that rely on federal dollars, all five of which voted for the president last November.

Written by Alex Spanko