Taxes can be a material component in the cost of living, depending on where people reside, how much they earn and what deductions are available. While some states have comparatively low taxes for all levels of income, others vary based on income levels. As usual, I invoke the TINSTAANREM axiom — There Is No Such Thing As A National Real Estate Market. Nor is there such a thing as equal levels of taxation from state to state.
To allow a comparison across the states at a set level of income. Kiplinger examined tax liabilities across all 50 states assuming the following:
- Married couple
- $150,000 of combined ordinary income
- $10,000 annual dividend income
- Two dependents
- $400,000 home with a mortgage
The following table shows the 10-states that are most tax friendly based on these assumptions as calculated by Kiplinger. Just because a state is high in one specific tax does not mean that total taxes are also high. Average property taxes in New Hampshire, for example, are $2,296 per $100,000 of real estate value. This is greater than two of the 10 least friendly tax states with Illinois at $2,408 per $100,000 of value and New Jersey at $2,530. Yet New Hampshire ranks 10th best among all states for total taxes.
The next table shows the states that are least tax friendly based on these assumptions.
I assume that Kiplinger selected these levels of income based on the profile of their typical readers. At differing levels of income and household makeup these ranks would no doubt vary.
These results differ from The Tax Foundation annual study on tax friendliness for business due to a differing methodology. See the Tax Foundation study summary for 2020 at http://blog.stewart.com/stewart/2019/11/23/best-states-to-do-business-tax-wise-in-2020/
To view the relative taxes for all 50 states as presented by Kiplinger (plus other taxes not included in this specific analysis) click https://www.kiplinger.com/tool/taxes/T055-S001-kiplinger-tax-map/index.php
While taxes are not the sole choice in deciding where to live and work, they do impact many people that have the flexibility to relocate. Personally, I will not live in a state with state and local income taxes – just the economist in me.