This year, courtesy of the fiscal cliff deal and the payroll tax hike that Congress passed in early January, the majority of Americans are facing higher tax bills. But depending on what state you live in, you may hardly feel the pinch.
For example, Wyoming residents enjoy one of the lowest sales tax rates in the country, and pay no corporate or individual income taxes. Meanwhile, New Yorkers pay some of the highest property taxes, individual income taxes and sales taxes, according to the Tax Foundation’s 2013 State Business Tax Climate report. It recently ranked the best and worst states for taxes by comparing state and local income taxes, property taxes and local sales taxes (see how the rankings were calculated here).
Not surprisingly, the states that raise revenue without imposing one of the five major taxes – individual income, corporate, property, sales or unemployment insurance – are among the best states for taxes in the country. These states are generally more competitive in attracting new businesses and generating economic growth.
States with higher taxes, on the other hand, have trouble retaining residents and businesses and often see high “out-migration” rates. According to a study by United Van Lines, New York and New Jersey, the states that ranked among the worst for taxes, were also among the states that had the highest exodus rates in 2012.