How Fair Is the Tax System in Your State?
Life + Money

How Fair Is the Tax System in Your State?

Americans think that most of the 50 states tax the poor too much and the rich too little – but the tax structures of some states are “fairer” than others, according to a new survey.

Montana has the fairest tax system in the U.S., while Washington State has the least fair according to a recent Wallet Hub survey and analysis of the fairest and least fair state tax systems in the country, which the personal finance website claims may be the first of its kind.

Related: The 10 Best States for Taxes in 2014

“The poor are the most overtaxed in Washington, Illinois and Florida,” claimed Wallet Hub. Meanwhile, the wealthy top 1 percent of Americans are the most undertaxed in Wyoming, Alaska and South Dakota, and the middle class is most overtaxed in Arkansas, New York and Hawaii, WalletHub found.

Wallet Hub asked Americans across the country what they think constitutes a fair state and local tax system, which includes sales tax, tax income, property tax and how generous refundable tax credits may be. Its analysts then ranked the states based on how closely their tax systems matched what Americans think is fair.

As expected, most Americans think that a “fair” system should tax higher-income households at a higher rate than it already does. The chart below does not show the tax rate for each group.  It does show that the one percent pays a higher percentage than the group represents demographically and the low income people pay lower rates than their population represent.

Here are the five states with the fairest tax systems:

  1. Montana
  2. Oregon
  3. South Carolina
  4. Delaware
  5. Idaho

And here are the five states with the least fair tax systems:

  1. Washington
  2. Hawaii
  3. Arkansas
  4. Illinois
  5. Florida

Related: 4 Mid-Year Tax Tips That Could Save You Big Bucks

“Current state and local tax systems are, on average, extremely unfair,” claims Wallet Hub. “While Americans—liberals and conservatives—think a progressive tax system is most fair, virtually every state has a regressive state and local tax structure.”

Wallet Hub surveyed more than 1,000 Americans, nationally represented by age and sex and with substantial variation across income levels, racial and ethnic categories and political beliefs.

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