Which states have the biggest tax burden for the middle class?
If you made the decision to relocate to another state, your federal income tax bill will not change simply because you crossed a state line. However, the same cannot be stated for your overall state and local tax owed.
The truth is, leaving a low-tax state and moving to a high-tax one may cost you thousands of dollars every year. Your income, property, sales, as well as other state and local taxes, can all be higher, turning into a tax burden.
That’s why folks considering relocating to a different state should do their research before hiring movers. If you don’t want to face heavier taxes than the one you’re facing right now, one of the first things you should know is which US states to avoid. Don’t worry, we’re here to help you.
This article works like a guide that talks about 7 states with the LARGEST tax burdens for middle-class families. Here you’ll find all the tax-related numbers you need to know, including overall income, property, and sales tax rates in each state mentioned. When we say middle-class family, we think of a hypothetical married couple, two children, combined incomes of $80,000, and a $300,000 house.
So, if you and your family are thinking about packing your stuff and moving to another state, make sure you read this article beforehand. It may help you avoid a tax burden!
- Median State and Local Sales Tax Rate: 6%
- Income Tax Range: 4.25% (flat-rate)
- Median Property Tax Rate: $1,501 per every $100,000 of assessed home value
Starting with the good news, sales taxes in Michigan are lower than the national average. There is a state tax of 6% on purchases in Great Lakes State, which is slightly on the high side compared with other states. However, local governments don’t levy any additional sales taxes.
Here comes the bad news: Michigan has a 4.25% flat rate, which is higher than what most other US states levy. This can definitely count as a tax burden for middle-class families. On top of that, cities may have additional local income taxes. For that reason, this state’s income tax bill for our hypothetical family is higher than the national average.
And there’s more: in Michigan, for a home worth $300,000, the annual property tax is $4,503. This overall tax burden makes Michigan one of the least tax-friendly places for middle-class families.
- Median State and Local Sales Tax Rate: 6%
- Income Tax Range: 2% for those with income up to $1,000; 5.75% for those with income over $250,000 (single filers) or over $300,000 (joint filers)
- Median Property Tax Rate: $1,078 per every $100,000 of assessed home value
Middle-class families in Maryland are slaughtered by state and local income taxes (Baltimore City and every county in Old Line State levy a local income tax). Its income tax bill is the highest in the US for our made-up family.
Luckily, property taxes may ease the tax burden. If our hypothetical family moved into a $300,000 house in Maryland, they would have to pay $3,234 in property taxes. However, the Maryland tax system is pretty friendly to shoppers. There’s a 6% state sales tax, but no additional local sales taxes.
5. New York
- Median State and Local Sales Tax Rate: 8.52%
- Income Tax Range: 4%% for those with income up to $8,500 (single filers) or up to $17,150 (joint filers); 10.9% for those with income over $25 million
- Median Property Tax Rate: $1,720 per every $100,000 of assessed home value
For our made-up middle-class family, New York’s income tax bill ranks in the “average” range when compared to other states’ taxes. Yet, the Empire State levies its own income taxes, and there’s also a commuter tax for those who work in or near New York. As a result, people who reside in these areas of the state bear a high tax burden.
While income taxes in New York City aren’t too bad for middle-class families, sales taxes are a different story. The state sales tax rate may be only 4%, but there are also local taxes that can add up to 4.85%. According to the Tax Foundation, the Empire State’s average combined state and local sales tax rate of 8.52% ranks 10th in the US.
Some people may call this an actual tax burden, but things can get worse when property taxes are brought into the discussion. If you live in New York in a $300,000 house, you owe $5,160 in property tax to the government. This makes it the eight-highest property tax in the country for a home of that value.
4. New Jersey
- Median Combined State and Local Sales Tax Rate: 6.6%
- Income Tax Range: 1.4% for those with income up to $20,000 or 10.75% for those with income over $1 million
- Median Property Tax Rate: $2,471 per every $100,000 of assessed home value
For middle-class families in New Jersey, income taxes are in a low range when compared to other states. Based on our estimations, the Garden State has the fourth-lowest broad-based income tax. Its sales taxes of 6.6% are also lower than the national average.
New Jersey residents may benefit from friendly income and sales taxes, but the state strikes them with a hefty tax when they buy a house. More precisely, property taxes in New Jersey are the highest in the country. That would make a tax burden of a whopping $7,413 for a $300,000 home.
- Median Combined State and Local Sales Tax Rate: 6.94%
- Income Tax Range: 0.33% for those with income up to $1,743 or 8.53% for those with income over $78,435
- Median Property Tax Rate: $1,561 per every $100,000 of assessed home value
Iowa residents definitely know what it’s like to deal with a tax burden, thanks to exorbitant property and income taxes. The state currently has the third-highest income tax in the US for our made-up middle-class family. At least things will change for the better in the future. Starting in 2023, Iowa’s income tax rate will gradually go down. Following that, as of 2026, a flat rate of 3.9% will apply.
Also, the median property tax rate in Iowa ranks the 11th-highest place in the country. If our hypothetical family moved into a $300,000 house in this state, they would expect a tax burden of about $4,683 in property taxes. That’s quite a lot.
Its combined state and local sales tax rate of 6.94% places Iowa in the middle of the list when compared to other states.
- Median Combined State and Local Sales Tax Rate: 6.35%
- Income Tax Range: 3% for those with income up to $10,000 (single filers) or $20,000 (joint filers). For those single filers with income over $500,000 and joint filers with income over $1 million, it’s 6.99%
- Median Property Tax Rate: $2,133 per every $100,000 of assessed home value
Living in Connecticut is expensive. And in terms of taxes, it all starts with the state’s real estate taxes. The average property tax in the Constitution State for a $300,000 house is $6,399 per year. Now that’s a tax burden! This makes Connecticut the third-highest in the nation. However, those who live in high-income areas like Fairfield County pay more than $10,000 per year in property taxes.
State income taxes in Connecticut are also on the high side: they are higher than the national average for our made-up middle-class family but not exorbitant.
Connecticut also has reasonable sales taxes. Since the state has no local sales taxes, residents only pay 6.35% (better than average) on most purchases, which may reduce the tax burden. Still, luxury items, such as jewelry valued at more than $5,000 or cars worth $50,000 or more, are taxed at 7.75%.
- Median Combined State and Local Sales Tax Rate: 8.81%
- Income Tax Range: 4.95% (flat-rate)
- Median Property Tax Rate: $2,241 per every $100,000 of assessed home value
Sorry, Illinois, but your middle-class families struggle with the highest tax burden in the country. The state taxes its residents at a higher rate than the national average for all three types of taxes we’re following in this article: sales, income, and property taxes. One of those has extremely high rates. This made us put Illinois at the top of our list.
When compared to other states’ tax rates, the Land of Lincoln’s 4.95% income tax doesn’t seem that high. That’s true if we’re talking about wealthy residents. However, for middle-class families, the income tax rate is on the high side.
Sales taxes are also high there. Illinois taxes 6.25% on most purchases (1% on prescription drugs and groceries). On top of that, local taxes can go up to 4.75% in certain areas within the state. The average merged state and local sales tax is 8.81%, ranking eighth in the country (note that the tax on groceries was suspended on July 1, 2022, and it will stay like that until June 30, 2023).
When it comes to the property taxes Illinois residents have to pay, the tax burden gets almost unbearable. If our made-up family bought a $300,000 house in Illinois, they would have to pay $6,723 yearly in property taxes.
Looking for ways to reduce the tax burden? The truth is, there are methods to LEGALLY avoid some taxes!