The best and worst states for taxes (ZT)


We all pay Uncle Sam the same no matter where we live, but property, gasoline, tobacco and sales taxes are all over the map.

By Rick VanderKnyff

If you live in Maine, New York, Connecticut or Washington, D.C., you are a big spender at tax time, like it or not. Alaska or Alabama? You get to keep a bigger slice of what you make.

While the IRS tends to monopolize our attention when it comes to taxes, it's not the only government agency with its hand out. Many of the taxes that command a piece of our income are collected at the state and local level, and they vary widely.

Where you live can have a big impact on how much you pay in taxes each year. The spread, according to numbers crunched by the nonprofit Tax Foundation, might not be enough to make you pull up stakes and move to a new state, but it can give you a case of tax envy. The state and local burden ranges from 6.4% (Alaska) to 13% (Maine).Looking for a loan?
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Add in the federal tax burden, and the disparity widens to 8.5 percentage points, from 33.5% at the top (Connecticut) to 25% at the bottom (Alaska again). The national average for state and local tax burden is 10.1%; add in federal taxes and the average is 29.1%.

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Want to see how your state ranks? See our interactive tax map.

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What are states collecting?
State income taxes are not the only determinant of state tax burdens. Washington, for example, is one of seven states with no personal income tax, but it still ranks 24th when it comes to state and local tax burden. When figuring state and local taxes, the Tax Foundation considers everything from sales and property taxes to gasoline excise taxes and vehicle license fees.

Federal tax rates, of course, are uniform across the country, but states with a higher per-capita income will have more taxpayers pushed into higher brackets, so the federal tax burden varies from state to state.

Your actual tax burden, of course, depends on many factors that go well beyond where you live -- how much you make, the source of your income, whether you own a home, the number of deductions you claim. The tax burden figures just provide some broad comparison.

Here's a breakdown of some of the numbers that go into your state and local taxes, and how some states fare on each.

Income tax
Seven states -- Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming -- have no state income tax. Tennessee and New Hampshire limit their tax to dividends and interest income only.

Comparisons for the other 41 states can be a tricky thing because income brackets and personal exemptions are all over the map. If you're interested in seeing how your state fares -- and you're willing to wade through some numbers -- check out this chart from the National Association of Tax Administrators.

States also vary in the way they tax retirement income; 15 states tax Social Security income, for instance, at least to some extent.

Fuel taxes
The federal government levies 18.4 cents on each gallon of gasoline sold. The amount that states tax on top of that varied in 2005 from 7.5 cents per gallon in Georgia and 8 cents in Alaska all the way up to 31 cents per gallon in Rhode Island and 29.1 cents in Wisconsin.

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That's just the state excise tax; other localities within a state may levy additional taxes, and gasoline in many states is also subject to sales tax.

Sales taxes
Speaking of sales tax, this is another area where the range is wide. The basic state rate goes all the way from 0% (in Alaska, Delaware, Montana, New Hampshire and Oregon) to 7% (in Mississippi, Rhode Island and Tennessee). California has a 7.25% rate, but 1% is a state-wide tax for local communities.

Counties and other localities can -- and do -- levy their own sales taxes on top of the state rate, however. The chart below shows the top sales tax in each state; if you want to see the sales tax for a particular ZIP code, try this calculator (free registration required).

Property taxes
Taxes on land and buildings are the biggest generators of revenue for local governments, and they are levied not at the state level but by other local assessing districts that include cities, counties, townships and school districts.

Because both the median home value of homes and the residential property tax rate varies so much across the country -- and even within states -- it can be difficult to come up with meaningful comparisons. When Kiplinger's surveyed state and local tax burdens in 2004, it found that among major cities, residents of New Orleans paid the lowest tax on a median-priced home: $495 on a house valued at $103,900 (largely because the first $75,000 of value is tax-free). In Chicago, the magazine found, a family would pay $4,654 in taxes on a home valued at $170,500.

Tobacco taxes
States and localities place additional taxes on a number of commodities, from fuel to alcohol, but perhaps no single product has been subject to as much rising taxation as tobacco. Smokers, it seems, are the one population who can be targeted for regular tax hikes without political consequences.

The chart below shows the full range of cigarette taxes by state, but here are the high and low states, just for quick comparison: The tax on a pack of cigarettes in Kentucky is 3 cents; in Rhode Island, it is $2.46.

When are you free?
The Tax Foundation, the source of our overall statistics, makes a big annual splash when it celebrates "Tax Freedom Day" -- that's what it calls the day when average Americans have earned enough to pay their taxes for the year.

April 17 was declared national Tax Freedom Day in 2005. (because of President Bush's tax cuts and a sluggish economy, the date has been sliding back from its record of May 2 in 2001).

Your own Tax Freedom Day will vary depending on where you live, though, according to the organization. In 2005, Alaska marked the occasion on April 2; residents of Connecticut had to wait until May 3. The Tax Foundation will release its 2006 dates in April.

Sales taxes by state
State Gasoline* Cigarettes Retail**
Alabama 18 cents 42.5 cents 11%
Alaska 8 160 7
Arizona 18 118 10.1
Arkansas 21.5 59 10.625
California 18 87 8.75
Colorado 22 87 9.9
Connecticut 25 151 6
Delaware 23 55
Florida 14.5 33.9 7.5
Georgia 7.5 37 7
Hawaii 16 140 4
Idaho 25 57 9
Illinois 20.1 98 9.25
Indiana 18 55.5 6
Iowa 20.5 36 7
Kansas 24 79 8.3
Kentucky 17.4 3 6
Louisiana 20 36 10.25
Maine 25.2 100 5
Maryland 23.5 100 5
Massachusetts 21 151 5
Michigan 19 200 6
Minnesota 20 48 7.5
Mississippi 18.4 18 7.25
Missouri 17.03 17 8.725
Montana 27 170
Nebraska 26.3 64 7
Nevada 23 80 7.5
New Hampshire 19.5 52
New Jersey 14.5 240 6
New Mexico 18.9 91 7.25
New York 23.2 150 8.75
North Carolina 26.85 5 7.5
North Dakota 21 44 7.5
Ohio 26 55 8
Oklahoma 17 103 10.5
Oregon 24 118
Pennsylvania 30 135 7
Rhode Island 31 246 7
South Carolina 16 7 7
South Dakota 22 53 6
Tennessee 21.4 20 9.75
Texas 20 41 8.25
Utah 24.5 69.5 7
Vermont 20 119 7
Virginia 17.5 20 4.5
Washington 28 142.5 8.9
West Virginia 27 55 6
Wisconsin 29.1 77 5.6
Wyoming 14 60 6
District of Columbia 22.5 100 5.75

*Additional federal levy is 18.4 cents nationwide
**Maximum state and local sales tax, 2004
Source: Tax Policy Center, MSN Money research