NJ Residents Face Highest State-Local Tax Burden

September 28, 2010

New Jersey taxpayers bear the heaviest state-local tax burden in 2008, and Alaskans have the lightest tax burden, according to a new report from the Tax Foundation, a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

In Tax Foundation Special Report, No. 163, "State-Local Tax Burdens Dip as Income Growth Outpaces Tax Growth," senior economist Gerald Prante computes each state's combined state-local tax burden, accounting for taxes paid out of state.

The nation as a whole paid 9.7% of its income in state-local taxes, down from 9.9% in 2007 primarily because income grew faster than tax collections between 2007 and 2008.

New Jersey residents paid 11.8%, topping the charts. New Yorkers were close behind, paying 11.7%, and Connecticut was third at 11.1%. The top ten were rounded out by Maryland (10.8%), Hawaii (10.6%), California (10.5%), Ohio (10.4%), Vermont (10.3%), Wisconsin (10.2%) and Rhode Island (10.2%).

Alaskans pay the least, 6.4 percent in 2008, but Nevada is close at 6.6 percent. In four states the residents pay between 7 and 8 percent of their income in state-local taxes: Wyoming (7.0%), Florida (7.4%), New Hampshire (7.6%) and South Dakota (7.9%).

Four other states round out the bottom ten: Tennessee (8.3%), Texas (8.4%), Louisiana (8.4%) and Arizona (8.5%).

Tax Foundation rankings are sometimes confused with rankings based on Census Bureau's tallies of state and local tax collections. The difference is out-of-state tax payments. When state and local governments collect large amounts from non-residents, whether as tourists, commuters, businesses or property owners, Census counts those payments in the collections of the taxing state; the Tax Foundation study counts them in the residential state of the taxpayer.

The most recent estimates are for fiscal year 2008 which ended June 30, and the historical burden data cover the 32 years starting with 1977.

Historical data and rankings, sorted by year and by state, are available at http://www.taxfoundation.org/taxdata/show/336.html and http://www.taxfoundation.org/taxdata/show/335.html.