The Highest and Lowest Taxes by State

Discussion in 'Business Operations' started by AGG Lawn Maintenance, Apr 4, 2003.

  1. AGG Lawn Maintenance

    AGG Lawn Maintenance LawnSite Senior Member
    from Elberon
    Messages: 422

    Best and worst states for taxes

    Philipp Harper

    The state of your tax bill depends in no small measure on your state.

    That's because the tax burdens imposed by the 50 states are as varied as their landscapes. You can pump up your business's bottom line by being smart about where you decide to operate.

    Of course, taxes aren't the only criteria people apply when choosing a business venue. If they were, Alaska would be far more crowded; by almost any measure, its residents pay the lowest tax rate in the nation. More below on where other states rank.

    First, though, it's important to understand that judging the severity of a state's total tax bite — business, property and all other taxes combined — is not the straightforward exercise it might appear to be. Here are two caveats to keep in mind when searching for a tax-friendly state:

    State-by-state rankings based on the combined federal, state and local tax bill often tell you less about a state's fiscal policies than about the wealth of your neighbors and how that impacts tax rates.

    Unless a state-by-state analysis takes into account who actually pays their taxes, and not simply where it is levied, it can sometimes be more misleading than insightful. In other words, "A tax burden is different from tax collection," says Bill Ahern, a spokesman for the Tax Foundation, a nonprofit advocacy group.

    Strip out federal taxes for greater accuracy

    The problem with combining federal, state and local taxes is that federal levies can skew the results badly.

    A state's federal tax burden rises or falls with the average federal rate paid by its residents. So, if a disproportionate share of the state population is made up of wealthy individuals who are taxed at the highest marginal rate, the state will show a disproportionately large total tax bill.

    "Connecticut is the classic example of a high total number," Ahern says. "There is a higher percentage of people there paying at the highest federal rate than in any other state."

    When used to calculate a combined tax burden, Connecticut's high federal tax bill at least partially obscures what is happening at the state and local levels. Connecticut has the country's highest tax burden, when counting federal taxes. But for state and local taxes only, Connecticut drops down to 10th-highest (see below).

    Meanwhile, Ahern adds, "the flip side of the coin is Mississippi," where a low level of personal income means a low per capita federal tax bill.

    "State officials in Mississippi say, 'Look how low our tax burden is,'" Ahern says. "But strip out the federal [taxes] and they rise like a rocket."

    The best and worst states for taxes

    To assess relative state tax burdens accurately, the Tax Foundation adjusts National Income and Product Account data collected by the U.S. Department of Commerce's Bureau of Economic Analysis. One important comparison the foundation makes is of the total tax burden in each state (including federal taxes) to just the state/local tax burden. In both cases, taxes are measured as a percentage of income.

    When federal taxes are included, the 10 states that imposed the lowest total tax burdens in 2002 were:

    State Income Tax (in %)
    1. Alaska
    2. Oklahoma
    3. (tie) West Virginia
    5. Tennessee
    6. North Dakota
    7. South Dakota
    8. (tie) Mississippi
    10. Louisiana 27.0

    Meanwhile, the highest total taxes were levied in:

    State Income Tax (in %)
    50. Connecticut
    49. Washington
    48. New York
    47. New Jersey
    46. Wyoming
    45. Wisconsin
    44. Minnesota
    43. (tie) Michigan
    41. California 36.7
    Makes me wounder what I am still am doing in NJ.
  2. Mykster

    Mykster LawnSite Senior Member
    Messages: 668

    Man, I LOVE Washington!!!!!!!
  3. landscaper3

    landscaper3 LawnSite Bronze Member
    Messages: 1,354

    Maine is the second highest tax state!!! Instead of Vacationland on our plates we have a sticker that says Taxationland! We have state tax, exise tax, business town tax, sales tax- and more and more!
  4. landscaper3

    landscaper3 LawnSite Bronze Member
    Messages: 1,354

    didnt work! had a tax survay.

    Attached Files:

  5. gslam88

    gslam88 LawnSite Member
    Messages: 146


    So then why am I still in CT???????

  6. landscaper3

    landscaper3 LawnSite Bronze Member
    Messages: 1,354

    gslam88 we all not learned our lesson!!!!!! LOL
  7. Green Pastures

    Green Pastures LawnSite Silver Member
    Messages: 2,457

    Where is the COMMONWEALTH of Virginia in the scope of things?

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