WASHINGTON — Tens of millions of Americans continue to live paycheck to paycheck, and with tax season here, some could face an even greater financial burden. A recent analysis by WalletHub is shedding light on how the impact of taxes varies across income levels and from state to state. Their findings also reveal that taxes in many states disproportionately affect those least able to afford them. Simply put, “living poor” (or finding a way to make ends meet on little income) is harder to do depending on the state you live in.
Taxes, such as property, sales, and certain state and local taxes, are considered regressive — meaning they take a larger percentage of income from low and middle-income individuals than from the wealthy. According to the Center for American Progress, 37.9 million Americans are living in poverty — that’s over 11 percent of the population.
However, the bottom 20 percent in terms of income hand over about 11.4 percent of their income in taxes, while the wealthiest one percent contribute only 7.2 percent. This imbalance underscores the financial strain placed on those with limited resources.
With the tax deadline looming for most Americans, WalletHub’s researchers focused on where people of different income brackets are most and least affected by sales and excise taxes, property taxes, and income taxes. The analysis doesn’t simply compare tax rates, which can be misleading. Instead, they considered the share of a person’s income that goes towards their total tax obligations. As a result, even states with lower tax rates can end up being more burdensome if they also have a higher cost of living.
“The wealthy and less fortunate are both subject to taxes, but unfortunately people who are not as well off can end up getting hit harder due to the regressive nature of many taxes,” says Cassandra Happe, an analyst with WalletHub, in a media release. “Living in a state where your income bracket isn’t squeezed as hard during tax season can save you a lot of money. A few states even cut costs dramatically by not charging income tax altogether.”
Best States Tax-Wise For Low-Income Earners:
- Alaska: 6.93% tax burden
- Montana: 7.28% tax burden
- Vermont: 7.30% tax burden
- Minnesota: 7.35% tax burden
- Delaware: 7.67% tax burden
Worst States Tax-Wise For Low-Income Earners:
- Louisiana: 12.63% tax burden
- Pennsylvania: 13.17% tax burden
- Hawaii: 13.74% tax burden
- Washington: 13.91% tax burden
- Illinois: 13.95% tax burden
Ranking Each American’s Tax Burden By State
|
State |
“Low Income” Rank |
“Middle Income” Rank |
“High Income” Rank |
|---|---|---|---|
| Alabama | 34 (11.01%) |
35 (10.41%) |
13 (8.14%) |
| Alaska | 1 (6.93%) |
1 (4.98%) |
1 (3.95%) |
| Arizona | 29 (10.64%) |
22 (9.53%) |
12 (7.99%) |
| Arkansas | 44 (11.59%) |
44 (11.08%) |
30 (9.49%) |
| California | 31 (10.68%) |
29 (9.96%) |
44 (10.87%) |
| Colorado | 16 (9.01%) |
18 (9.30%) |
22 (9.11%) |
| Connecticut | 45 (11.61%) |
41 (10.85%) |
49 (12.01%) |
| Delaware | 5 (7.67%) |
3 (7.41%) |
11 (7.64%) |
| District of Columbia | 10 (8.12%) |
39 (10.71%) |
47 (11.82%) |
| Florida | 33 (11.00%) |
15 (9.03%) |
5 (6.50%) |
| Georgia | 22 (9.96%) |
17 (9.16%) |
23 (9.12%) |
| Hawaii | 49 (13.74%) |
51 (13.62%) |
50 (12.08%) |
| Idaho | 13 (8.68%) |
5 (7.79%) |
15 (8.45%) |
| Illinois | 51 (13.95%) |
49 (12.57%) |
45 (10.93%) |
| Indiana | 46 (11.78%) |
37 (10.55%) |
20 (8.85%) |
| Iowa | 41 (11.44%) |
42 (10.86%) |
38 (10.28%) |
| Kansas | 38 (11.25%) |
45 (11.49%) |
43 (10.81%) |
| Kentucky | 35 (11.08%) |
34 (10.26%) |
34 (9.82%) |
| Louisiana | 47 (12.63%) |
48 (12.05%) |
32 (9.66%) |
| Maine | 14 (8.68%) |
25 (9.65%) |
40 (10.45%) |
| Maryland | 25 (10.08%) |
33 (10.03%) |
46 (11.53%) |
| Massachusetts | 17 (9.13%) |
16 (9.14%) |
29 (9.46%) |
| Michigan | 9 (8.10%) |
19 (9.35%) |
18 (8.77%) |
| Minnesota | 4 (7.35%) |
12 (8.47%) |
42 (10.57%) |
| Mississippi | 39 (11.26%) |
43 (10.88%) |
27 (9.39%) |
| Missouri | 7 (7.93%) |
6 (7.84%) |
16 (8.66%) |
| Montana | 2 (7.28%) |
8 (8.13%) |
9 (7.37%) |
| Nebraska | 32 (10.88%) |
36 (10.47%) |
36 (10.09%) |
| Nevada | 26 (10.27%) |
11 (8.47%) |
7 (6.70%) |
| New Hampshire | 8 (8.06%) |
2 (7.04%) |
2 (5.72%) |
| New Jersey | 18 (9.37%) |
26 (9.85%) |
48 (11.97%) |
| New Mexico | 6 (7.70%) |
38 (10.60%) |
37 (10.12%) |
| New York | 43 (11.50%) |
50 (12.58%) |
51 (13.36%) |
| North Carolina | 20 (9.67%) |
14 (8.80%) |
14 (8.44%) |
| North Dakota | 11 (8.64%) |
7 (7.92%) |
3 (6.12%) |
| Ohio | 37 (11.22%) |
31 (9.98%) |
25 (9.30%) |
| Oklahoma | 30 (10.64%) |
24 (9.62%) |
19 (8.82%) |
| Oregon | 27 (10.39%) |
40 (10.74%) |
41 (10.50%) |
| Pennsylvania | 48 (13.17%) |
46 (11.81%) |
31 (9.61%) |
| Rhode Island | 36 (11.21%) |
20 (9.37%) |
26 (9.34%) |
| South Carolina | 12 (8.67%) |
10 (8.47%) |
28 (9.40%) |
| South Dakota | 23 (9.98%) |
9 (8.41%) |
6 (6.55%) |
| Tennessee | 40 (11.32%) |
27 (9.88%) |
8 (7.12%) |
| Texas | 42 (11.50%) |
30 (9.97%) |
10 (7.51%) |
| Utah | 24 (10.01%) |
32 (10.03%) |
35 (9.83%) |
| Vermont | 3 (7.30%) |
13 (8.62%) |
39 (10.36%) |
| Virginia | 15 (8.73%) |
23 (9.61%) |
33 (9.75%) |
| Washington | 50 (13.91%) |
47 (11.96%) |
21 (8.98%) |
| West Virginia | 21 (9.90%) |
21 (9.45%) |
17 (8.67%) |
| Wisconsin | 28 (10.62%) |
28 (9.92%) |
24 (9.23%) |
| Wyoming | 19 (9.43%) |
4 (7.69%) |
4 (6.22%) |
Note: All of the columns in the table above depict the percentage of tax burden in each income bracket along with their national rank. A rank of 1 represents the lowest tax burden in that category.
Some states stand out for their tax policies. Florida, Texas, and Washington do not impose income taxes, which can significantly reduce the overall tax burden on residents. However, Illinois exhibits a contrasting trend, with the lowest-income earners facing the highest tax burden in the nation at 13.95 percent, illustrating how sales and excise taxes can disproportionately affect those with lower incomes.
“Our tax system has way too many loopholes and encourages wealthy individuals and corporate taxpayers and their lawyers to find ways around the law,” explains Richard Painter, S. Walter Richey Professor of Corporate Law at the University of Minnesota. “This undermines the ethics of the business community and the legal profession by encouraging a nihilistic approach to the law. Lawyers and tax accountants are trained in how to get around the law. This has been going on for decades and has not stopped.”
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Methodology
In order to identify the best states to be taxed according to one’s income group, WalletHub generated estimates of 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. WalletHub did so using data from the Institute on Taxation & Economic Policy’s 2024 report, which published estimates of tax burden at seven points in the state-specific income distribution.