The beginning of each year has one certainty: tax season. While it can be a stressful or giving time for many, the average U.S. household pays nearly $11,000 in federal income taxes every year.
Though all are faced with this, there is a noticeable difference in regard to state and local taxes. Those that are in the highest taxing states pay two times more than those in the most affordable states. With tax season upon us all and the tax-filling deadline of April 18 growing ever-nearer, a study was conducted by WalletHub regarding the states with the highest and lowest tax rates.
It was stated that low income taxes do not necessarily mean low taxes as a whole. States such as Washington and Texas do not implement income tax, though residents spend 8% (Washington) and 1.74% (Texas) of their annual income on taxes such as sales, excise and real estate. Whereas in a state such as California, in which residents owe almost 5% or their income in sales and excise taxes, they also pay just 0.75% in real estate tax.
In the study, those at WalletHub compared state and local tax rates in the 50 states and District of Columbia against national medians. They also worked to calculate relative income-tax obligations by applying the effective income-tax rates in each state and locality to the average American’s income.
Through this research, it was discovered that Utah is ranked number seven overall for low taxes. The Beehive State comes behind Alaska at number one, followed by Delaware, Montana, Nevada, Wyoming and Florida.
Utah has a 2.04% effective real estate tax rate and a 2.44% effective income tax rate. In comparison, the three highest states for taxes that were New York, Connecticut and Illinois. Factors such as gas taxes and state cigarette tax rate were also considered.
Finally, it was stated that red states impose lower tax rates than blue states, at a comparison of 27.88% to 24.04%.