Which State Should You Live in to Pay the Least in Overall Taxes?
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I often hear about the advantages of living in one of the few states in the United States that do not collect state income taxes. However, I just as often wondered how other tax implications in each state compare. How much does each state charge in sales tax and property tax?
For example… three states (of 8 total) that do not collect state income taxes at all are Florida, Texas, and Tennessee. Do they charge significantly more in state sales tax to make up for the difference? What about property taxes? Is there a large discrepancy there?
Is it really more advantageous for an average person to live in a state that doesn’t collect taxes on their income?
The Variables Prevent a Challenge
As I did my research for this article and started digging into the numbers, it became abundantly clear that there are too many variables in play to determine comparable numbers that would apply to anybody (or everybody).
Income tax rates in some states are fixed rates where everybody pays the exact same percentage. Other states charge progressive variable income tax rates, where the percentage you pay is based on your income. This variable alone made this comparison nearly impossible to complete.
State sales taxes also complicated matters, as some states also have local jurisdictions (cities or counties) that charge separate sales taxes in addition to the state sales taxes. Again, this variable made this comparison very difficult.
Property taxes prevented the final challenge, as those rates are typically set by local jurisdictions and not by the state. But, I felt that property taxes needed to be included in this comparison because everybody has to live somewhere. Even renters indirectly pay property tax, so it applies to almost everybody.
Note: I purposely ignored gas tax for this comparison, as the world moves towards more electric vehicles and the amount that an average person spends on gas can vary so greatly.
How I Came Up With The Average Household for the United States
I created a spreadsheet in Google Sheets with 5 different tabs (sheets) as follows…
I used the median household income for each state. The sales tax data listed out the average sales tax rate for each state, so I used that and calculated based on a made-up assumption that each household spends 15% of its income on goods that are subject to sales tax. The income taxes for each income level are exact, based on the default variables in the IRS calculator that I used. The property taxes are actual averages based on average home prices in each state.
The Highest Overall Taxed States for Average U.S. Households
Congratulations to New Jersey, Connecticut, and Illinois for rounding out the top 3 for being the highest taxed states for average households! The Big Apple (New York) followed up in the 4th spot overall. To my surprise, California didn’t even make the top 10!
| State | Median Income | State Income Tax | Sales Tax | Avg Property Tax | Total Taxes |
| New Jersey | $85,245 | $3,241.91 | $844 | $5,419 | $9,504.84 |
| Connecticut | $79,855 | $3,942.03 | $761 | $4,658 | $9,360.65 |
| Illinois | $68,428 | $3,272.10 | $904 | $4,942 | $9,118.38 |
| New York | $71,117 | $3,532.50 | $909 | $3,749 | $8,190.38 |
| Massachusetts | $84,385 | $3,999.25 | $791 | $2,667 | $7,457.36 |
| Minnesota | $73,382 | $4,068.26 | $824 | $2,429 | $7,321.71 |
| Wisconsin | $63,293 | $2,760.81 | $516 | $4,027 | $7,303.33 |
| Iowa | $61,836 | $3,109.48 | $644 | $3,407 | $7,160.19 |
| District of Columbia | $90,842 | $5,054.82 | $818 | $1,221 | $7,093.40 |
| Hawaii | $83,173 | $5,839.49 | $554 | $606 | $6,999.42 |
The Lowest Overall Taxed States for Average U.S. Households
Congratulations to Wyoming, Nevada, and Tennessee for being the top 3 states to live in for the average household in terms of paying the least in overall taxes. Florida and Alaska were not far behind in 4th and 5th place.
| State | Median Income | State Income Tax | Sales Tax | Avg Property Tax | Total Taxes |
| Wyoming | $65,304 | $0.00 | $511 | $1,319 | $1,830.33 |
| Nevada | $62,043 | $0.00 | $766 | $1,310 | $2,075.92 |
| Tennessee | $54,833 | $0.00 | $785 | $1,548 | $2,333.48 |
| Florida | $57,703 | $0.00 | $607 | $1,934 | $2,540.75 |
| Alaska | $77,790 | $0.00 | $205 | $2,599 | $2,804.37 |
| Arkansas | $49,475 | $1,084.53 | $703 | $1,358 | $3,145.32 |
| Washington | $77,006 | $0.00 | $1,073 | $2,134 | $3,207.08 |
| Louisiana | $50,800 | $1,414.25 | $728 | $1,187 | $3,328.96 |
| South Dakota | $59,896 | $0.00 | $575 | $2,857 | $3,432.00 |
| North Dakota | $65,315 | $657.20 | $682 | $2,138 | $3,477.09 |
State Income Taxes Do Matter!
I’ll admit – I was slightly surprised when I saw the final numbers after completing the calculations. I thought the low (or no) income tax states would surely compensate for the discrepancy by charging much higher sales taxes and property taxes. As it turns out, 7 of the 8 states that collect zero income taxes made the top 10, with 5 of those being the top 5 spots! Texas is the only no income tax state that did not make the top 10 in this list.
Want to see ALL of the data? Click here to access a View Only version of my Google Sheet.
Pay Less in Taxes by Living in a Certain State
The bottom line is this… if you don’t already live in one of the states that charges the least in taxes and you’re open to considering a move… you may want to consider one of the states that charges the least in overall taxes.
After all – it’s always wise to keep as much of your money as possible out of the hands of the government, who is well-known for their ability to mishandle money.
Remember – these numbers were calculated using vague averages and made-up assumptions. Be sure to calculate your own numbers based on your specific variables before making a big life decision, like moving to another state just because some random blogger published some numbers. Lol
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