State and local governments maintain roads, run schools and pay police, and they need to fund public functions and state infrastructure. For most Americans, this additional tax burden comes from a combination of state income taxes, state and local sales taxes, and local property taxes.

Every state handles these taxes a little differently, and which state you live in has a significant impact on your wallet. But while citizens have long since considered the cost of taxes when determining if and where to move, the debate has only intensified over the past year with the rise of remote working and the idea that you’re not necessarily tied to the same location as your employer.

But which states are the most tax-optimized? To generate a ranking of the tax-friendliness of U.S. states, MoneyGeek analyzed tax costs across all 50 states to measure those with the lowest tax burden, considering sales, income and property taxes.

Image Credit: monkeybusinessimages/istockphoto.

A Note on Taxes

The federal government had limited authority to collect taxes until the Sixteenth Amendment was ratified in 1913. States were left to their own devices to fund the cost of government. As a result, each of the 50 states and the District of Columbia has its own unique tax scheme. Some states rely heavily on income taxes, while others depend on sales taxes. Some states aim to keep taxes as low as possible, and others seek to maximize revenue.

States With No Sales Tax

• New Hampshire
• Oregon
• Montana
• Delaware

States With No Income Tax

Seven states do not collect tax on personal income, and Tennessee is poised to join the list:

• Alaska
• Wyoming
• South Dakota
• Florida
• Texas
• Nevada
• Washington

States With the Lowest Effective Property Taxes

For homeowners, the annual property tax bill can be a hefty expense. When calculating your mortgage, accounting for taxes can help you keep your housing costs in check. The states with the lowest property tax burdens are:

• Hawaii
• Alabama
• Colorado
• Louisiana
• Delaware

Image Credit: DepositPhotos.com.

Methodology

To calculate the least and most tax-friendly states, we researched income, sales and property tax rates by state. Using expenditure and income data from the Bureau of Labor Statistics’ Consumer Expenditure Survey, we constructed a hypothetical family with one dependent, gross income of $82,852, and a home worth $349,400 (the median new home price at the time we conducted our research). We then estimated the state taxes this hypothetical family would pay in each state. We ranked the states based on the estimated total taxes and assigned letter grades from A to E based on the size of the tax payment.

You can find a full list of sources here.

Image Credit: akaplummer/istock.

See How Your Annual Tax Bill Compares With Other States

MoneyGeek estimated the state taxes paid by a married couple making the median national income of $82,852, with one child and who own their $349,400 home to assess each state’s tax-friendliness. States are sorted by lowest to highest tax “grade.”

Image Credit: gradyreese.

51. New Jersey

• Grade: E
• Estimated Taxes: $11,872
• Tax as % of Income: 14.30%
• Change in Pop. 2021: -0.10%

Image Credit: Ultima_Gaina / istockphoto.

50. Illinois

• Grade: E
• Estimated Taxes: $13,894
• Tax as % of Income: 16.80%
• Change in Pop. 2021: -0.90%

Image Credit: ibsky.

49. Connecticut

• Grade: E
• Estimated Taxes: $12,545
• Tax as % of Income: 15.10%
• Change in Pop. 2021: 0.10%

Image Credit: DenisTangneyJr.

48. Wisconsin

• Grade: D
• Estimated Taxes: $10,976
• Tax as % of Income: 13.20%
• Change in Pop. 2021: 0.10%

Image Credit: FierceAbin.

47. Vermont

• Grade: D
• Estimated Taxes: $10,453
• Tax as % of Income: 12.60%
• Change in Pop. 2021: 0.50%

Image Credit: DenisTangneyJr.

46. New York

• Grade: D
• Estimated Taxes: $11,495
• Tax as % of Income: 13.90%
• Change in Pop. 2021: -1.60%

Image Credit: Eloi_Omella.

45. New Hampshire

• Grade: D
• Estimated Taxes: $11,694
• Tax as % of Income: 14.10%
• Change in Pop. 2021: 0.80%

Image Credit: DenisTangneyJr.

44. Nebraska

• Grade: D
• Estimated Taxes: $10,446
• Tax as % of Income: 12.60%
• Change in Pop. 2021: 0.10%

Image Credit: marekuliasz.

43. Michigan

• Grade: D
• Estimated Taxes: $10,239
• Tax as % of Income: 12.40%
• Change in Pop. 2021: -0.20%

Image Credit: haveseen.

42. Massachusetts

• Grade: D
• Estimated Taxes: $9,771
• Tax as % of Income: 11.80%
• Change in Pop. 2021: -0.50%

Image Credit: Rolf_52.

41. Kansas

• Grade: D
• Estimated Taxes: $10,166
• Tax as % of Income: 12.30%
• Change in Pop. 2021: 0.00%

Image Credit: fotoguy22 / iStock.

40. Iowa

• Grade: D
• Estimated Taxes: $11,398
• Tax as % of Income: 13.80%
• Change in Pop. 2021: 0.10%

Image Credit: JoeChristensen.

39. West Virginia

• Grade: C
• Estimated Taxes: $7,855
• Tax as % of Income: 9.50%
• Change in Pop. 2021: -0.40%

Image Credit: hkim39 // istockphoto.

38. Virginia

• Grade: C
• Estimated Taxes: $8,083
• Tax as % of Income: 9.80%
• Change in Pop. 2021: 0.10%

Image Credit: DenisTangneyJr.

37. Utah

• Grade: C
• Estimated Taxes: $7,783
• Tax as % of Income: 9.40%
• Change in Pop. 2021: 1.70%

Image Credit: ” 4kodiak”.

36. Texas

• Grade: C
• Estimated Taxes: $8,027
• Tax as % of Income: 9.70%
• Change in Pop. 2021: 1.10%

Image Credit: DenisTangneyJr.

35. Rhode Island

• Grade: C
• Estimated Taxes: $9,617
• Tax as % of Income: 11.60%
• Change in Pop. 2021: -0.10%

Image Credit: danlogan.

34. Pennsylvania

• Grade: C
• Estimated Taxes: $9,542
• Tax as % of Income: 11.50%
• Change in Pop. 2021: -0.20%

Image Credit: AppalachianViews.

33. Oregon

• Grade: C
• Estimated Taxes: $9,298
• Tax as % of Income: 11.20%
• Change in Pop. 2021: 0.10%

Image Credit: HaizhanZheng.

32. Oklahoma

• Grade: C
• Estimated Taxes: $8,228
• Tax as % of Income: 9.90%
• Change in Pop. 2021: 0.60%

Image Credit: DepositPhotos.com.

31. Ohio

• Grade: C
• Estimated Taxes: $8,999
• Tax as % of Income: 10.90%
• Change in Pop. 2021: -0.10%

Image Credit: dypics.

30. North Carolina

• Grade: C
• Estimated Taxes: $7,658
• Tax as % of Income: 9.20%
• Change in Pop. 2021: 0.90%

Image Credit: ” Darwin Brandis”.

29. Missouri

• Grade: C
• Estimated Taxes: $7,639
• Tax as % of Income: 9.20%
• Change in Pop. 2021: 0.20%

Image Credit: eyecrave.

28. Mississippi

• Grade: C
• Estimated Taxes: $8,025
• Tax as % of Income: 9.70%
• Change in Pop. 2021: -0.20%

Image Credit: stevegeer.

27. Minnesota

• Grade: C
• Estimated Taxes: $8,888
• Tax as % of Income: 10.70%
• Change in Pop. 2021: 0.00%

Image Credit: JoeChristensen.

26. Maryland

• Grade: C
• Estimated Taxes: $8,758
• Tax as % of Income: 10.60%
• Change in Pop. 2021: -0.10%

Image Credit: James_Lane.

25. Maine

• Grade: C
• Estimated Taxes: $9,411
• Tax as % of Income: 11.40%
• Change in Pop. 2021: 0.70%

Image Credit: DepositPhotos.com.

24. Kentucky

• Grade: C
• Estimated Taxes: $8,169
• Tax as % of Income: 9.90%
• Change in Pop. 2021: 0.10%

Image Credit: Thomas Kelley.

23. Georgia

• Grade: C
• Estimated Taxes: $8,972
• Tax as % of Income: 10.80%
• Change in Pop. 2021: 0.70%

Image Credit: SeanPavonePhoto.

22. Arkansas

• Grade: C
• Estimated Taxes: $8,625
• Tax as % of Income: 10.40%
• Change in Pop. 2021: 0.50%

Image Credit: Rdlamkin.

21. Washington

• Grade: B
• Estimated Taxes: $5,414
• Tax as % of Income: 6.50%
• Change in Pop. 2021: 0.30%

Image Credit: 4nadia.

20. South Dakota

• Grade: B
• Estimated Taxes: $5,938
• Tax as % of Income: 7.20%
• Change in Pop. 2021: 0.90%

Image Credit: Rex_Wholster.

19. South Carolina

• Grade: B
• Estimated Taxes: $7,147
• Tax as % of Income: 8.60%
• Change in Pop. 2021: 1.20%

Image Credit: SeanPavonePhoto.

18. North Dakota

• Grade: B
• Estimated Taxes: $5,556
• Tax as % of Income: 6.70%
• Change in Pop. 2021: -0.50%

Image Credit: sequential5.

17. New Mexico

• Grade: B
• Estimated Taxes: $6,921
• Tax as % of Income: 8.40%
• Change in Pop. 2021: -0.10%

Image Credit: Davel5957.

16. Montana

• Grade: B
• Estimated Taxes: $6,700
• Tax as % of Income: 8.10%
• Change in Pop. 2021: 1.70%

Image Credit: YinYang.

15. Louisiana

• Grade: B
• Estimated Taxes: $6,556
• Tax as % of Income: 7.90%
• Change in Pop. 2021: -0.60%

Image Credit: DenisTangneyJr.

14. Indiana

• Grade: B
• Estimated Taxes: $7,258
• Tax as % of Income: 8.80%
• Change in Pop. 2021: 0.30%

Image Credit: f11photo.

13. Idaho

• Grade: B
• Estimated Taxes: $7,198
• Tax as % of Income: 8.70%
• Change in Pop. 2021: 2.90%

Image Credit: knowlesgallery.

12. Hawaii

• Grade: B
• Estimated Taxes: $6,982
• Tax as % of Income: 8.40%
• Change in Pop. 2021: -0.70%

Image Credit: Art Wager.

11. District of Columbia

• Grade: B
• Estimated Taxes: $6,626
• Tax as % of Income: 8.00%
• Change in Pop. 2021: -2.90%

Image Credit: DepositPhotos.com.

10. Delaware

• Grade: B
• Estimated Taxes: $6,074
• Tax as % of Income: 7.30%
• Change in Pop. 2021: 1.20%

Image Credit: mdgmorris.

9. Colorado

• Grade: B
• Estimated Taxes: $6,210
• Tax as % of Income: 7.50%
• Change in Pop. 2021: 0.50%

Image Credit: Jacob Boomsma / istockphoto.

8. California

• Grade: B
• Estimated Taxes: $6,628
• Tax as % of Income: 8.00%
• Change in Pop. 2021: -0.70%

Image Credit: mlauffen.

7. Arizona

• Grade: B
• Estimated Taxes: $5,665
• Tax as % of Income: 6.80%
• Change in Pop. 2021: 1.40%

Image Credit: wanderluster.

6. Alabama

• Grade: B
• Estimated Taxes: $6,894
• Tax as % of Income: 8.30%
• Change in Pop. 2021: 0.30%

Image Credit: James Deitsch.

5. Wyoming

• Grade: A
• Estimated Taxes: $3,279
• Tax as % of Income: 4.00%
• Change in Pop. 2021: 0.30%

Image Credit: dschreiber29.

4. Tennessee

• Grade: A
• Estimated Taxes: $5,377
• Tax as % of Income: 6.50%
• Change in Pop. 2021: 0.80%

Image Credit: Swarmcatcher.

3. Nevada

• Grade: A
• Estimated Taxes: $3,879
• Tax as % of Income: 4.70%
• Change in Pop. 2021: 1.00%

Image Credit: AlizadaStudios.

2. Florida

• Grade: A
• Estimated Taxes: $4,632
• Tax as % of Income: 5.60%
• Change in Pop. 2021: 1.00%

Image Credit: Elisa.rolle.

1. Alaska

• Grade: A
• Estimated Taxes: $4,507
• Tax as % of Income: 5.40%
• Change in Pop. 2021: 0.00%

Image Credit: Chilkoot.

Analysis Shows Population Growth in Lower Tax States

For many, the pandemic has altered their perceptions about where they want to live and where they can live. Millions of city-weary residents aching for more space have moved since the start of the pandemic.

Analysis of state tax burden rates and the change in population from 2020 to 2021, as estimated by the U.S. Census Bureau shows a negative correlation. The lower the state and local tax burden, the higher the population growth in 2021.

Four of the five states with an A grade in tax friendliness had population growth at or above the national average.

Of the states with an E grade, two out of three had population declines in 2021. Of the nine states with a D grade, only two — New Hampshire and Vermont — had population growth higher than the national average.

Image Credit: istockphoto/fizkes.

Key Facts About Taxes

For a typical middle-class family, the difference between living in the highest-tax state in our rankings — Illinois — and the lowest — Wyoming — is nearly $10,000 a year. A breakdown of the state-by-state tax picture reveals:

• Illinois imposes the highest tax burden. A hypothetical middle-income family would pay $13,894 a year in state and local income, sales and property taxes.
• Wyoming collects the least. The same family with the same financial picture would spend just $3,279.
• Mississippi is in the middle of the pack. A typical family would pay $8,025 a year in state and local taxes.

You’re probably not going to pick up and move simply to avoid state and local taxes. There are simpler ways to cut your tax bill, like saving for retirement, calculating business expenses and taking advantage of education credits and deductions. But if you’re pondering a relocation for professional or personal reasons, taking tax implications into consideration could help you choose your next move.

Related:

• 49 surprising facts about American taxes & taxpayers
• Here’s why parents should file their taxes early

This article
originally appeared on MoneyGeek.com and was
syndicated by MediaFeed.org.

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