New York Has Highest Tax Burden, Wyoming Has Lowest in Tax Foundation Study

Published April 3, 2014

The nonpartisan Tax Foundation released its Annual State-Local Tax Burdens report on Wednesday, showing results from the 2011 fiscal year. The main findings include an overall decrease in state-local tax burdens. Americans paid 9.8 percent of their collective income in state and local taxes in 2011. Depending on the state, the burden ranged from 6.9 percent to 12.6 percent.

The report identifies heavy burdens in many states.

New Yorkers had the highest burden, paying 12.6 percent of their collective income in state and local taxes. New Jersey (12.3 percent) and Connecticut (11.9 percent) came in second and third, respectively. These states have topped the tax burden list since 2005. These states also find themselves at the top of the lists for most liberal states in the United States and worst-run states in the United States. Although there has been a decrease in tax burdens from 2010 to 2011, states like Connecticut have seen an overall rise in their tax burden since 1977. Despite their heavy tax burdens, New York, New Jersey, and Connecticut are each still experiencing major budget shortfalls. The heavy tax burden has not translated into lower deficits and smart budgets.

No Income Tax

The states with the lowest state-local tax burdens include Wyoming, Alaska, and South Dakota. Taxpayers forgo 6.9 percent, 7.0 percent, and 7.1 percent of their income in each state, respectively. These states, along with many of the other least-burdened states, do not have a tax on wage income. Places like Alaska and Wyoming also have the advantage of being resource-rich. By taking advantage of these resources such as oil, residents are relieved from a hefty tax burden. The same advantages are seen in states with major tourist destinations because they have the ability to export some of their tax burden by imposing taxes that hit tourists. This Tax Foundation report acknowledges this differentiation, unlike the Census Bureau, making its conclusions unique and potentially more accurate when measuring tax burdens.

Since 1977, all three of these least-burdened states have experienced major decreases in tax burdens.

Solid Budgets

Unlike the states with the most burdensome tax policies, Wyoming, Alaska, and South Dakota are some of the most conservative states in the United States as well as some of the best-run. Notably, none of these states are facing major budget shortfalls. The taxpayers and residents of Wyoming, Alaska, and South Dakota are facing a low tax burden while reaping the benefits of well-run state governments.

Overall, the Tax Foundation’s Annual State-Local Tax Burdens report offers important insight into tax burdens imposed on states’ residents. The report takes into account tax collections that cross state borders, giving accurate accounts of the burdens faced by individuals. States that burden their residents the most are facing budget problems that high taxes have yet to fix. Conversely, states with a low tax burden enjoy well-run state governments and budgets.

Rebecca Schieber ([email protected]) writes from Chicago.

Internet Info

“Annual State-Local Tax Burden Ranking, FY 2011,” Tax Foundation: