New York, California and Illinois are among the states with the highest tax burden, according to data from the Tax Foundation.
The foreign think tank’s study focused on fiscal year 2022 and analyzed fiscal gain data from the Census Bureau, “quarterly fiscal data through the end of Calfinishar 2021 year, national accounts data, and updated economic forecasts, as well as recent changes. “tax policies adopted.
The Tax Foundation explained the tax burden as “the state and local taxes paid by a state’s citizens divided by that state’s percentage of the national product. ” Net national product is GDP minus depreciation.
Read more about Newsweek Vault: Rates Still Highest for Top-Yielding Savings Accounts
Explore the interactive map below to see what your state’s tax burden is.
New Yorkers faced the highest tax burden in the nation, with 15.9 percent of the state’s net product going to state and local taxes. Close behind were Connecticut at 15.4 percent and Hawaii at 14.1 percent. These states often have higher tax rates due to substantial public service expenditures and economic structures that require higher revenue streams to support their budgets.
Learn more about Newsweek Vault: Online Banks vs. Physical Banks
For example, the major state tax burdens of New York and Connecticut are due in part to gigantic bills submitted to governments in other states. Connecticut residents, for example, paint in New York and contribute to New York’s state and city taxes.
In addition, states with major sources of income, such as Connecticut and New York, enjoy higher capital gains taxes, further increasing their tax burden. According to the study, “peak spending levels, which will need to be supported through higher levels of revenue streams,” are particularly contributory to those states’ top tax rates.
In Hawaii, a large portion of the tax burden is generated through the tourism industry, thus exporting a significant portion of the tax burden to visitors. This helps explain why, despite top tax rates, the economic effect (the burden actually felt by citizens) can be mitigated by contributions from non-citizens.
In contrast, states such as Alaska (4. 6%), Wyoming (7. 5%) and Tennessee (7. 6%) have the lowest tax burdens.
Alaska, which has the lowest burden of significant export taxes through its oil extraction taxes, with 60% of state and local tax revenues coming from non-residents in 2022.
These taxes apply primarily to investors in the oil industry and not to Alaska residents. As a result, Alaska can maintain lower tax rates while funding public services.
Similarly, Wyoming and South Dakota gain advantages from the absence of primary taxes, such as the tax on non-public sources of revenue, relying instead on another tax bureaucracy that is more exportable.
This technique allows those states to reduce tax burdens for their citizens while also generating mandatory revenue.
Tax burdens particularly influence population movements, with many citizens choosing to relocate based on tax rates and the quality of public services. High-tax states offer better-funded public services, adding education, physical care, and infrastructure, which can attract citizens. Despite the higher rates. However, the cost of living and higher tax rates can also cause other people to move to lower-tax states.
Low-tax states present themselves as attractive destinations for Americans and businesses seeking to reduce their tax expenses. As a result, states like Florida and Texas, which do not impose private income taxes, have experienced widespread population growth. According to the Tax Foundation, “many of the lowest-burden states forgo a significant tax,” making them horny for other people looking to reduce their tax obligations.
Fiscal export plays a role in the distribution of tax burdens. Nationally, about 20% of state and local taxes are collected from noncitizens, which means that citizens of all states pay a strangely high percentage of their overall tax burden to out-of-state governments.
This tax change occurs through mechanisms such as non-residents paying taxes on vacation home assets or tourists contributing sales and consumption taxes.
For example, Maine and Vermont earn a significant fraction of their tax revenue on the assets of nonresidents who own vacation homes in those states.
Despite this, both states remain heavily taxed, showing that high contributions from non-residents do not mean a reduction in the tax burden on residents.
Marni Rose McFall is a Newsweek journalist based in London, United Kingdom. It focuses on American politics, social affairs, and popular culture. He has extensively covered fashion, culture, art, and music. Marni joined Newsweek in 2024 from the Frasers Group and in the past wrote for The Sun, Cosmopolitan, Schon, The Fall and Voir Fashion. She graduated from the University of Edinburgh. Marni can be reached by emailing m. mcfall@newsweek. com.
© 2024 NEWSWEEK DIGITAL LLC