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10 Best & Worst States for Low-Income Taxpayers

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When it comes to state and local taxes, low- and middle-income taxpayers pay higher effective tax rates than their wealthier counterparts.

On average, Americans in the lowest income quintile, earning $19,000 or less, pay 10.9% of their income in state and local taxes, while the top 1% of households, making $471,000 or more, pay 5.4%, according to the Institute on Taxation & Economic Policy. But some state tax structures are more regressive than others.

The personal finance social network WalletHub used data from the Institute’s 2015 report to calculate the share of income a person contributes toward property taxes, sales and excise taxes, and income taxes in each state tax regime.

WalletHub used the Institute’s data to measure the state-specific tax burden on residents at three income levels — low ($25,000), medium ($50,000) and high ($150,000) — in each of the 50 U.S. states and the District of Columbia.

It found that the overall tax burden for upper-income earners was four times higher in New York than in Alaska, while for those in the middle-income range, it was twice as high in New York as in Alaska.

(Checkout: 10 Best States for Retirement: 2015)

In Washington, low-income earners shoulder an overall tax burden two times higher than in Alaska.

Unlike federal income tax rates, which are graduated based on income, many state income taxes are not. Four of the 10 states with the most regressive tax regimes had flat or nearly flat income tax rates, the tax institute reported. Another five of those states collect no broad-based personal income tax at all, relying instead on sales and excise taxes, which have a bigger impact on lower-income taxpayers.

Following are the best and worst states for low-income earners in terms of their overall tax burden in 2015, based on WalletHub’s analysis: Best States to Be Poor From Tax Perspective

Myrtle Beach, South Carolina

5. South Carolina

Sales tax: 4.12%

Property tax: 2.09%

Income tax: 0.88 %

Total tax as % of income: 7.08

4. Nevada

Sales tax: 4.80%

Property tax: 1.60%

Income tax: 0.60%

Total tax as % of income: 7.00

3. Montana

Sales tax: 1.92%

Property tax: 3.22%

Income tax: 0.96%

Total tax as % of income: 6.10

2. Delaware

Sales tax: 2.01%

Property tax: 1.64%

Income tax: 1.78%

Total tax as % of income: 5.43

And the Best state is…

Anchorage Alaska at night

1. BEST:  Alaska

Sales tax: 2.44%

Property tax: 2.80%

Income tax: 0.16%

Total tax as % of income: 5.40

Worst States to Be Poor From Tax Perspective

Cincinnati, Ohio

5. Ohio

Sales tax: 5.88%

Property tax: 3.18%

Income tax: 2.40%

Total tax as % of income: 11.46

4. Arizona

Sales tax: 7.22%

Property tax: 3.42%

Income tax: 1.06%

Total tax as % of income: 11.70

3. Illinois

Sales tax: 5.62%

Property tax: 4.42%

Income tax: 2.06%

Total tax as % of income: 12.10

2. Hawaii

Sales tax: 8.50%

Property tax: 1.20%

Income tax: 2.60%

Total tax as % of income: 12.30%

And the Worst state is…

Seattle Space Needle

1. WORST:  Washington

Sales tax: 9.76%

Property tax: 3.27%

Income tax: 0.00%

Total tax as % of income: 13.03%

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