Anyone who has a head start on tax planning this year knows that many Americans – particularly high earners – are paying a lot more in taxes this year. But while there’s no dodging federal taxes, the pinch of additional levies varies greatly depending on which state you live in.
Wyoming residents, for example, pay a sales tax of just 4 percent, and pay no income tax. Marylanders pay a 6 percent sales tax in addition to income taxes ranging from 2 percent to 5.75 percent, depending on income. The Tax Foundation collects data on more than 100 tax provisions for each state and then ranks them to create its annual State Business Tax Climate Index.
Several states have moved within the rankings for the 2014 list, with Texas dropping out of the top ten for the first time, landing at #11, and Virginia and Kentucky both falling three places to #26 and #27, respectively. Meanwhile, Arizona climbed five ranks to #22, while Kansas rocketed six spots to #20.
Still, the rankings don’t tell the entire story since the impact of state tax policies depends on a person’s income and consumption patterns. Washington State, for example, has one of the lowest overall tax burdens in the country, but its poorest citizens pay more than the residents of any other state, according to a recent report by the left-leaning Institute on Taxation and Economic Policy.
That study found that tax policies in every state impose higher effective tax rates on poor families than on their richest residents.
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