Now that tax season has arrived, we are forced to realize how much we pay to our state governments. As April approaches, it’s good to access your overall tax bite and how it’s affected by where you live. The state you live in can significantly change how much money you get to keep at the end of the year and how much you have to hand over to your state.
Beth Braverman of the Fiscal Times compiled a list of the states with the toughest tax climate from the Tax Foundation’s data for 2014. “The Tax Foundation collects data on more than 100 tax provisions for each state and then ranks them to create its annual State Business Tax Climate Index.” The foundation looks at which states have the highest tax rates, and also if they are overly complex or unfair to certain individuals.
“One thing that’s important to remember here is that state and local tax rates are only part of the total sales tax story,” said Tax Foundation spokesperson Richard Borean by email. “Equally important are sales tax bases — what the tax applies to — which can have a palpable impact on how much the tax collects in revenue and how the tax affects the economy.”
Here are the worst ten states for taxes in 2014:
10. Maryland
Top state income tax rate: 5.75 percent
Sales tax rate: 6 percent
Per capita property tax: $1,467
Maryland has relatively high taxes across the board. The state is looking into lowering its corporate income tax from 8.25% to 6% in the next five years and to increase the estate tax threshold from $1 million to $5.25 million.
9. Connecticut
Top State Income tax Rate: 6.7 percent
Sales tax rate: 6.35 percent
Property tax per capita: $2,522
Connecticut has extremely high property taxes and sales, income and corporate taxes in Connecticut are also worse than average. The state is also the single, only state to have a gift tax.
8. Wisconsin
Top state income tax rate:7.65 percent
State sales tax:5 percent
Per capita property tax:$1,724
Wisconsin ranks among the worst states for taxes due to its relatively high income tax plus alternative minimum tax on individuals. However, the state has passed some favorable property and corporate tax reforms.
7. Ohio
Top state income tax rate: 5.33 percent
State sales tax: 5.75 percent
Per capita property tax: $1,140
While Ohio’s tax rates look low, Ohio is on our top ten list because of a change in the Tax Foundation’s methodology. The group now penalizes states for how they treat LLCs and S corporations. Ohio is on the list for having 10 brackets.
6. Rhode Island
Top State Income Tax Rate: 5.99 percent
Sales tax: 7 percent
Property tax per capita: $2,083
High corporate and property taxes made Rhode Island place poorly. Rhode Island was also named least tax-friendly state in the country for retirees by Kiplinger Magazine, due to taxing Social Security benefits, pension income, and other sources of retirement income. However, next year the state’s ranking will probably improve because the state’s corporate income tax will fall from 9% to 7%.
5. Vermont
Top state income tax rate:8.95 percent
State sales tax:6 percent
Per capita property tax: $2,197
High property and income taxes resulted in Vermont’s poor showing on the Tax Foundation ranking. At 8.95 percent, it is sandwiched between New York and New Jersey with one of the highest marginal income tax rates in the nation. Vermont makes up some lost ground in the overall rankings with its state sales tax, which the Tax Foundation ranks at 16th from the top.
4. Minnesota
Top state income tax rate: 9.85 percent
State sales tax: 6.88 percent
Per capita property tax: $1,535
Minnesota made several changes to its tax code this year including: raising its top income tax rate by 2%, and installing an individual tax hike on earners making more than $150,000. The state also has high sales, property and corporate income taxes.
3. California
Top State Income Tax Rate: 13.3 percent
Sales tax: 7.5 percent
Property tax per capita: $1,450
California is known for having one of the highest income taxes in the country at 13.3% on $1 million of taxable income. The state also has the highest state-wide sales tax rate and its 7.5% sales tax rate mandates a 1% local tax rate.
2. New Jersey
Top state income tax rate: 8.97 percent
State sales tax:7 percent
Per capita property tax: $2,896
New Jersey taxes score poorly in about every tax category. The state has the highest rates for every type of tax and adds many complexities.
1. New York
Top State Income Tax Rate: 8.82 percent
Sales tax: 4 percent
Property taxes per capita: $2,280
New York wins the worst state for taxes. The state had a high individual tax rate and high sales tax However, Governor Andrew Cuomo has announced the state’s new tax relief commission will be looking for ways to change the state’s tax code.
There it is, the list of the worst states to live in for taxes. If you are struggling your current geography, we hope this list will help you determine if another location has more possibilities for you.
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