Best and Worst States for Taxes in America - Where does your state rank?

States raise money through a variety of different taxes, fees and charges. They charge different rates for income, property, sales, fuel, wireless services and sins like alcohol and tobacco. This can make it hard to see how states compare to each other.

• Wyoming is the most tax-friendly state in the country. It has zero state income tax and on average charges only $635 per $100,000 of property value.
• Illinois is the most tax unfriendly state with a flat income tax of 4.95% with on average $2,408 in property taxes owed for every $100,000 of property value.
• 6 out of the top 10 most tax-friendly states have zero income tax.
• Tax levels vary substantially at the state level, with relatively heavy burdens in the Northeast and light tax levels across rural states like Alaska, Montana and North Dakota.

Tax rate information comes from Kiplinger, while effective tax rate info came from a calculator from SmartAsset, using the median U.S. household income of $61,937. Assumption is the average worker lived in the state capital with no dependents. Then, each category of taxation was weighted based on their contribution to total state taxes, including taxes on income, sales, fuel, property, wireless services and “sin” taxes like alcohol and tobacco. Finally, a summary of the weighted scores was leveraged to create the ranking of most and least friendly states for taxation.

The below lists divide states into 5 Groups in rank order based on Overall Total Taxes:

Top 10 Most Tax-Friendly States

1. Wyoming

2. Delaware

3. Alaska

4. Montana

5. Nevada

6. New Hampshire

7. Florida

8. North Dakota

9. Tennessee

10. Oregon

Middle of the Pack States (listed in rank order):

Tax Friendly States: Oregon, Hawaii, South Dakota, West Virginia, Louisiana, Washington DC, Arizona, Indiana and Virginia.

Mixed: Colorado, Mississippi, South Carolina, Alabama, New Mexico, Utah, North Carolina, Washington Missouri, Indiana, Massachusetts, Oklahoma, Maine and Texas.

Not Friendly: Georgia, Arizona, California, New Mexico, Kentucky, Maryland, Vermont, Rhode Island and Iowa.

The 10 Least Friendly States for Taxation

1. Illinois

2. New York

3. New Jersey

4. Connecticut

5. Pennsylvania

6. Nebraska

7. Ohio

8. Kansas

9. Wisconsin

10. Michigan

It shouldn’t come as a shock to anyone that Illinois is the least tax friendly state in the Union. For two years, the state couldn’t pass a budget, costing taxpayers an additional $1 billion in late payments and surcharges. In fact, the state is on track to reach a deficit of $3 billion this year. Illinois taxpayers are therefore on the hook for lots of new taxes and fees.

Another story is how state income taxes in particular impact the overall tax burden that workers face. Nine states have zero income tax, 6 of which are in the Top 10 list above (Wyoming, Alaska, Nevada, New Hampshire, Tennessee and Florida). Income taxes are a major factor in overall taxation because they’re progressive, meaning high-income earners pay higher marginal rates. Florida’s status as an income-tax free state is one reason why many people move to the Sunshine in retirement.

Some states levy uneven taxes on workers. There are several states in the Northeast with extremely high tax burdens, like New York, New Jersey and Connecticut. By contrast, many rural states like Wyoming, Montana and North Dakota have very light tax levels.

There are lots of good reasons for different tax rates around the country. New York must raise revenue for infrastructure projects that other states simply don’t have. For example, the Gateway Program encompasses a major overhaul and renovation of the Northeast Corridor train network, which links together millions of people.

Sources: Kiplinger, SmartAsset, howmuch