The Cost of Where You Live: Tax Burden by State
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States with the Highest Tax Burdens | States with Medium Tax Burdens | States with the Lowest Tax Burdens | What to Keep in Mind | Why This Matters
Every April, state and local taxes take cents off of every dollar you earn. Depending on where you live, you could be giving anywhere from 5 to 14 cents per dollar you earn. A couple of cents may seem insignificant, but over your career, it can amount to hundreds of thousands of dollars.
To better understand how impactful these few cents can be, it helps to shift your focus from simple tax rates to tax burden instead. A state’s tax burden is the share of total personal income that residents actually pay in state and local taxes when you add up:
- Income taxes
- Property taxes
- Sales and excise taxes.
Let’s look at each state’s tax burden to see where your state stands.
States with the Highest Tax Burdens
Hawaii
Hawaii has the highest tax burden, with residents handing over roughly 13% to 14% of their income to state and local governments.
The breakdown:
- Income taxes – About 4%
- Property taxes – About 2.6% to
- Sales and excise taxes – About 7.5%
New York
New York has a tax burden of over 12%. Around 5.8% comes from income tax, the highest of any state, and the rest comes from local property taxes and sales taxes. It is expensive, but it is worth noting that tax revenue helps sustain infrastructure, transit systems, and public services.
Vermont
Vermont carries the highest property tax burden in the country. It takes roughly 4.9% to 5% of residents’ income, more than three times what Alabama homeowners pay. Between that and a hefty income tax, Vermont’s total tax burden consistently lands among the top five or six heaviest in the nation.
Connecticut, Maine, Minnesota, and New Jersey
Connecticut, Maine, Minnesota, and New Jersey. New Jersey stands out for its property taxes, which are among the highest in absolute dollar terms anywhere in the United States. Homeowners in some New Jersey cities direct close to 10% of their income toward property tax bills alone.
California
California gets its reputation as a high-tax state primarily from its income tax, which carries one of the highest top marginal rates in the country at 13.3%. When all taxes are factored in, California’s total burden places it in the upper third of states nationally, typically ranking around 35th to 40th most favorable, depending on the methodology used.
Illinois and Wisconsin
Illinois and Wisconsin also rank among the high-burden states, with Illinois known for property tax rates that rival New Jersey’s, sitting near 1.88% of home value, among the highest in the nation.
Oregon
Oregon draws attention for its individual income tax burden, placing among the highest in the country, with over 4.8% of residents’ income. Oregon has no sales tax, which somewhat softens the blow, but it is still outweighed by income tax, making it one of the costliest states for income taxes.
States with Medium Tax Burdens
Georgia, Missouri, Indiana, North Carolina, Colorado, Virginia, Ohio, Montana, and Arizona
Residents of these states pay between 7% and 9% of their total income in state and local taxes. They also use different combinations of income, property, and sales taxes to raise revenue, with none really standing out in any single category.
Michigan, Kentucky, and West Virginia
Michigan, Kentucky, and West Virginia all have moderate income taxes and property tax burdens that are more manageable than in the Northeast. Louisiana is expected to become more favorable due to recently having overhauled its tax code in a late 2024 special session, adopting:
- A flat 3% income tax rate
- A 5.5% corporate rate
Nebraska
Nebraska lowered its top marginal income tax rate to 5.2% as part of ongoing reforms, making it slightly more competitive. Montana implemented a tiered property tax structure in recent years, with some saying it redistributes the burden rather than reducing it.
States with the Lowest Tax Burdens
Alaska
Alaska has the lowest tax burden in the country at roughly 4.9% of personal income. Alaskans pay:
- No state income tax
- A low 3.3% of income in property taxes
- Only about 1.6% in sales and excise taxes
The state funds itself heavily through oil and gas revenue, effectively reducing its residents’ tax bills.
New Hampshire
New Hampshire ranks as the second-most tax-friendly state, with no general sales tax and having recently removed the tax on interest and dividend income. The state relies primarily on property taxes, making it expensive for homeowners but a good option for renters and mobile workers.
Wyoming, South Dakota, Tennessee, Florida, Nevada, and Texas
Wyoming, South Dakota, Tennessee, Florida, Nevada, and Texas all don’t have personal income tax, giving them a head start in tax burden comparisons. However, the trade-off is real. Texas, for example, makes up for missing income tax revenue with property tax rates that are among the most costly in the Sun Belt. Homeowners often find that their total tax bill is not as low as the “no income tax” headline may suggest.
Tennessee and Florida
Tennessee and Florida manage to keep both property and sales taxes at moderate levels, making them popular states among retirees and remote workers comparing after-tax living costs across states.
New Mexico, Arkansas, and Mississippi
New Mexico, Arkansas, and Mississippi also have lower total burden rates, though all three have income taxes. Lower costs of living and modest government spending allow these lighter tax loads.
What to Keep in Mind
A few things to consider when reading any state tax comparison:
No Income Tax Does Not Mean No Tax
States without an income tax almost always compensate through some combination of higher property taxes, sales taxes, or fees. The total burden ultimately matters more than any standalone rate.
The SALT Deduction Has Changed the Math
The federal deduction for state and local taxes, capped at $10,000 from 2018-2024, was raised to $40,000 in 2025, with a phase-out above $500,000 in income. For residents of high-tax states, that raised ceiling noticeably increases the federal tax relief available.
Burden Is Not the Same as Value
A state with a high tax burden that provides excellent public schools, maintained roads, functioning transit, and strong social services may offer a better deal than a low-burden state where those things are absent or underfunded. It’s not just how much you pay, but what you get in return.
Why This Matters
Whether you are planning a move, considering a job offer in another state, or trying to understand why your paycheck feels smaller than it should, knowing your state’s true tax burden and what it’s made up of is important financial information. Next time you think about where to settle for retirement, or taking that job offer in another state, keep these rates in mind. Where you live is a tax decision, intended or not.
Sources:
Congress.gov – The SALT Cap: Overview and Analysis
U.S. Census Bureau — Quarterly Summary of State & Local Tax Revenue (QTAX)
U.S. Census Bureau — Annual Survey of State Government Tax Collections (STC)