With the April 15 tax filing deadline right around the corner, WalletHub released a new study examining which states had the highest and lowest state and local tax rates to determine where residents are giving the most and least money back to their respective governments.
“Every year during tax season, Americans are reminded of just how much of their hard-earned income isn’t theirs to keep. Living in the right state can ease the stress of tax time, though, as taxpayers in the least expensive states pay less than half as much as those in the most expensive states,” Chip Lupo, an analyst at WalletHub, said in a statement.
Researchers calculated effective rates for income tax, real estate tax, vehicle property tax, and sales and excise tax for all 50 states and the District of Columbia, then combined those individual rates to determine an effective total state and local tax rate based on the median U.S. household income.
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The WalletHub study also provides the average annual amount of state and local taxes paid by residents based on their respective state’s median income, giving a better indication of how much these residents pay each year.
Illinois was found to have the highest total effective tax rate at 16.58%, with households earning the state’s median income paying roughly $12,270 in state and local taxes each year.
New York ranked second with a total effective tax rate of 14.74% and the average household spending approximately $13,774 in state and local taxes annually.
The $13,774 paid by New Yorkers is the second-highest annual amount of state and local taxes paid by residents across the country, trailing only New Jersey, where residents pay an average of $15,032.
The lowest tax states are Alaska, Delaware, Wyoming, Idaho, and Montana.
“People consider many factors in deciding where to live, such as job opportunities, proximity to family, climate, housing costs, school quality, culture, taxes, etc. Thus, while taxes are part of the set of information that individuals consider in deciding where to live, it is not the only (or probably even the primary) factor for most people,” Stephen Lusch, PhD, associate professor of accounting and academic director, Neeley Fellows, at Texas Christian University, said in the study. “[T]here is growing evidence of a significant relationship between taxes and the location decisions of people; this is particularly true among high-income earners (for example, professional athletes and entertainers).”
Below is how the states rank by state and local tax rates in 2025, from lowest to highest:
| Overall Rank (1=Lowest) | State | Effective Total State & Local Tax Rates on Median U.S. Household* | Annual State & Local Taxes on Median U.S. Household* | % Difference Between State & U.S. Avg.** | Annual State & Local Taxes on Median State Household*** | Adjusted Overall Rank (based on Cost of Living Index) |
|---|---|---|---|---|---|---|
| 1 | Alaska | 6.77% | $5,348 | -37.99% | $5,952 | 8 |
| 2 | Delaware | 7.17% | $5,664 | -34.33% | $6,012 | 2 |
| 3 | Wyoming | 7.49% | $5,915 | -31.42% | $5,640 | 3 |
| 4 | Idaho | 7.71% | $6,089 | -29.40% | $6,246 | 1 |
| 5 | Montana | 7.83% | $6,185 | -28.29% | $6,028 | 4 |
| 6 | Nevada | 8.59% | $6,788 | -21.29% | $7,114 | 13 |
| 7 | Colorado | 8.66% | $6,841 | -20.68% | $8,668 | 12 |
| 8 | Florida | 8.67% | $6,847 | -20.61% | $6,628 | 6 |
| 9 | South Carolina | 8.70% | $6,876 | -20.28% | $5,843 | 5 |
| 10 | District of Columbia | 9.05% | $7,150 | -17.10% | $11,543 | 43 |
| 11 | North Dakota | 9.13% | $7,216 | -16.33% | $6,445 | 15 |
| 12 | New Hampshire | 9.45% | $7,467 | -13.42% | $8,935 | 29 |
| 13 | California | 9.70% | $7,664 | -11.14% | $11,653 | 37 |
| 14 | Utah | 9.75% | $7,707 | -10.64% | $9,522 | 19 |
| 15 | South Dakota | 9.80% | $7,742 | -10.24% | $6,667 | 14 |
| 16 | Missouri | 9.85% | $7,784 | -9.75% | $6,472 | 7 |
| 17 | Arizona | 9.96% | $7,869 | -8.77% | $8,030 | 20 |
| 18 | North Carolina | 10.00% | $7,902 | -8.38% | $6,981 | 10 |
| 19 | Tennessee | 10.10% | $7,976 | -7.52% | $6,807 | 9 |
| 20 | Georgia | 10.27% | $8,116 | -5.90% | $7,590 | 11 |
| 21 | West Virginia | 10.41% | $8,226 | -4.63% | $5,816 | 17 |
| 22 | Oregon | 10.54% | $8,329 | -3.42% | $9,714 | 34 |
| 23 | Alabama | 10.63% | $8,395 | -2.67% | $6,519 | 16 |
| 24 | Oklahoma | 10.68% | $8,436 | -2.19% | $6,361 | 18 |
| 25 | Minnesota | 10.76% | $8,500 | -1.45% | $9,082 | 26 |
| 26 | Maine | 10.85% | $8,574 | -0.59% | $7,795 | 35 |
| 27 | Virginia | 10.96% | $8,659 | 0.40% | $9,913 | 28 |
| 28 | New Mexico | 11.01% | $8,699 | 0.87% | $6,832 | 27 |
| 29 | Massachusetts | 11.22% | $8,861 | 2.74% | $12,725 | 46 |
| 30 | Rhode Island | 11.29% | $8,923 | 3.45% | $10,258 | 44 |
| 31 | Vermont | 11.45% | $9,043 | 4.85% | $8,814 | 41 |
| 32 | Indiana | 11.45% | $9,049 | 4.92% | $7,579 | 25 |
| 33 | Maryland | 11.51% | $9,096 | 5.47% | $11,801 | 45 |
| 34 | Arkansas | 11.62% | $9,182 | 6.46% | $6,650 | 21 |
| 35 | Kentucky | 11.67% | $9,221 | 6.92% | $7,048 | 22 |
| 36 | Michigan | 11.88% | $9,385 | 8.81% | $7,777 | 23 |
| 37 | Washington | 11.94% | $9,434 | 9.38% | $12,680 | 40 |
| 38 | Wisconsin | 12.03% | $9,508 | 10.24% | $8,473 | 31 |
| 39 | Mississippi | 12.26% | $9,685 | 12.30% | $6,698 | 24 |
| 40 | Hawaii | 12.31% | $9,722 | 12.72% | $13,310 | 51 |
| 41 | Louisiana | 12.43% | $9,821 | 13.87% | $7,401 | 32 |
| 42 | Texas | 12.54% | $9,908 | 14.88% | $9,093 | 33 |
| 43 | Ohio | 12.75% | $10,074 | 16.80% | $7,974 | 30 |
| 44 | Iowa | 13.14% | $10,384 | 20.40% | $8,456 | 36 |
| 45 | Nebraska | 13.22% | $10,443 | 21.08% | $9,003 | 38 |
| 46 | Kansas | 13.76% | $10,871 | 26.05% | $9,090 | 39 |
| 47 | Pennsylvania | 13.94% | $11,012 | 27.68% | $9,955 | 42 |
| 48 | New Jersey | 13.98% | $11,044 | 28.06% | $15,032 | 49 |
| 49 | Connecticut | 14.54% | $11,488 | 33.20% | $13,231 | 50 |
| 50 | New York | 14.74% | $11,642 | 34.99% | $13,774 | 47 |
| 51 | Illinois | 16.58% | $13,099 | 51.88% | $12,270 | 48 |
“There are indications that more and more people are considering taxes when deciding where to live, given that the differences in state tax rates have increased over the years, in particular during the pandemic when people find out they do not need to live close to where they work,” Xu Jiang, associate professor of accounting at Duke University’s Fuqua School of Business, said in the study. “High-tax states like New York and California see their residents flee to low-tax states like Texas and Florida. I think they should consider taxes when deciding where to live because taxes directly affect their after-tax income and should be an important factor.”
The full WalletHub study can be found here.
With Tribune News Services
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Tags: Income Taxes, state and local tax rates, states, Taxes
