WalletHub: Illinois Worst State For Taxpayers
With Tax Day looming, WalletHub today (Tuesday, March 14, 2017) released its yearly Tax Rates by State report, which compares the cost of the average person’s various obligations in the 50 states and the District of Columbia.
Guess what? We’re No. 51!
That’s Illinois’ overall ranking of states in terms of most and least burdensome tax rates.
Every year, the average U.S. household pays more than $5,700 in federal income taxes, according to the Bureau of Labor Statistics. “And while we’re all faced with that same obligation, there is significant disparity when it comes to state and local taxes,” WalletHub says.
Taxpayers in the most tax-expensive states, for instance, pay three times more than those in the cheapest states to meet their civic burden, according to WalletHub.
This year’s tax-filing deadline is April 18, by the way. And that’s why WalletHub does its annual rankings around this time of year.
WalletHub’s methodology is interesting because it attempts to rank states against national medians. To illustrate, WallletHub calculated relative income-tax obligations by applying the effective income-tax rates in each state and locality to the average American’s income.
According to the report, the annual state and local taxes on median U.S. household comes to $8,011 in Illinois. The No. 1 state was Alaska, where that “median U.S. household” pays $3,060.
Scroll down for the complete ranking and a full description of WalletHub’s methodology.
Methodology
In order to identify the states with the highest and lowest tax rates, WalletHub’s analysts compared the 50 states and the District of Columbia across four types of taxation:
Real-Estate Tax: WalletHub first divided the “Median Real-Estate Tax Amount Paid” by the “Median Home Price” in each state. WalletHub then applied the resulting rates to a house worth $178,600, the median value for a home in the U.S., in order to obtain the dollar amount paid as real-estate tax per household.- Vehicle Property Tax: WalletHub examined data for cities and counties collectively accounting for at least 50 percent of the state’s population and extrapolated this to the state level using weighted averages based on population size. For each state, WalletHub assumed all residents own the same car: a Toyota Camry LE four-door sedan, 2016’s highest-selling car, valued at $23,070, as of March 2017.
- Income Tax: WalletHub used the percentage of income (middle income rate) spent on income tax from WalletHub’s Best States to Be Rich or Poor from a Tax Perspective report. “Income” refers to the mean third quintile U.S. income amount of $54,286.
- Sales & Excise Tax: We used the percentage of income (middle income rate) spent on sales and excise taxes from WalletHub’s Best States to Be Rich or Poor from a Tax Perspective report. “Income” refers to the mean third quintile U.S. income amount of $54,286.
Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Tax Foundation, Federation of Tax Administrators, American Petroleum Institute, National Automobile Dealers Association, each state’s Department of Motor Vehicles and WalletHub research.
Tax Rates by State
| Overall Rank | State | Effective Total State & Local Tax Rates on Median U.S. Household* | Annual State & Local Taxes on Median U.S. Household* | % Difference Between State & U.S. Avg.** | Annual State & Local Taxes on Median State Household*** | Adjusted Overall Rank (based on Cost of Living Index) |
|---|---|---|---|---|---|---|
| 1 | Alaska | 5.64% | $3,060 | -47.41% | $4,227 | 5 |
| 2 | Delaware | 6.07% | $3,293 | -43.41% | $3,852 | 1 |
| 3 | Montana | 6.89% | $3,741 | -35.72% | $3,596 | 3 |
| 4 | Wyoming | 7.43% | $4,036 | -30.64% | $4,355 | 2 |
| 5 | Nevada | 7.66% | $4,157 | -28.56% | $4,028 | 7 |
| 6 | Tennessee | 7.97% | $4,327 | -25.65% | $3,566 | 4 |
| 7 | Idaho | 8.48% | $4,604 | -20.88% | $4,095 | 6 |
| 8 | California | 8.79% | $4,774 | -17.97% | $6,908 | 34 |
| 9 | South Carolina | 8.84% | $4,800 | -17.51% | $4,066 | 11 |
| 10 | Florida | 8.94% | $4,851 | -16.65% | $4,287 | 10 |
| 11 | Oregon | 9.22% | $5,004 | -14.01% | $5,481 | 26 |
| 12 | Utah | 9.25% | $5,019 | -13.75% | $5,723 | 8 |
| 13 | Colorado | 9.34% | $5,071 | -12.85% | $5,918 | 14 |
| 14 | Alabama | 9.43% | $5,120 | -12.01% | $4,097 | 9 |
| 15 | Arizona | 9.60% | $5,211 | -10.46% | $4,872 | 12 |
| 16 | South Dakota | 9.77% | $5,302 | -8.89% | $4,625 | 21 |
| 17 | District of Columbia | 10.00% | $5,428 | -6.72% | $8,481 | 45 |
| 18 | North Dakota | 10.03% | $5,447 | -6.40% | $5,367 | 17 |
| 19 | New Hampshire | 10.09% | $5,475 | -5.91% | $7,025 | 35 |
| 20 | Louisiana | 10.33% | $5,608 | -3.62% | $4,652 | 16 |
| 21 | Hawaii | 10.33% | $5,610 | -3.59% | $7,979 | 49 |
| 22 | West Virginia | 10.38% | $5,635 | -3.17% | $4,237 | 18 |
| 23 | Georgia | 10.57% | $5,739 | -1.39% | $5,106 | 15 |
| 24 | North Carolina | 10.63% | $5,773 | -0.80% | $5,046 | 20 |
| 25 | Oklahoma | 10.70% | $5,809 | -0.17% | $4,712 | 13 |
| 26 | New Mexico | 10.73% | $5,825 | 0.10% | $4,933 | 23 |
| 27 | Virginia | 10.89% | $5,913 | 1.61% | $7,165 | 29 |
| 28 | Vermont | 10.89% | $5,913 | 1.62% | $6,651 | 42 |
| 29 | Missouri | 11.02% | $5,981 | 2.77% | $5,169 | 19 |
| 30 | Texas | 11.12% | $6,034 | 3.69% | $5,196 | 22 |
| 31 | Massachusetts | 11.52% | $6,253 | 7.45% | $9,069 | 47 |
| 32 | Minnesota | 11.59% | $6,291 | 8.11% | $6,911 | 32 |
| 33 | Maine | 11.63% | $6,316 | 8.53% | $5,941 | 40 |
| 34 | Washington | 11.72% | $6,363 | 9.34% | $7,806 | 37 |
| 35 | Indiana | 11.87% | $6,444 | 10.74% | $5,549 | 24 |
| 36 | Maryland | 11.92% | $6,470 | 11.19% | $9,371 | 44 |
| 37 | Kentucky | 12.01% | $6,522 | 12.08% | $5,162 | 28 |
| 38 | Mississippi | 12.14% | $6,589 | 13.23% | $4,810 | 25 |
| 39 | Kansas | 12.28% | $6,665 | 14.53% | $5,897 | 30 |
| 40 | Arkansas | 12.28% | $6,665 | 14.54% | $5,005 | 27 |
| 41 | Pennsylvania | 12.33% | $6,691 | 14.98% | $6,472 | 39 |
| 42 | New Jersey | 12.63% | $6,855 | 17.79% | $10,969 | 46 |
| 43 | Iowa | 12.84% | $6,968 | 19.75% | $6,167 | 33 |
| 44 | Michigan | 13.00% | $7,058 | 21.28% | $5,741 | 31 |
| 45 | Ohio | 13.06% | $7,087 | 21.79% | $5,947 | 36 |
| 46 | Connecticut | 13.56% | $7,361 | 26.49% | $10,155 | 50 |
| 47 | Rhode Island | 13.57% | $7,367 | 26.60% | $8,531 | 48 |
| 48 | New York | 13.58% | $7,370 | 26.64% | $9,495 | 51 |
| 49 | Wisconsin | 13.60% | $7,384 | 26.89% | $7,091 | 41 |
| 50 | Nebraska | 13.80% | $7,493 | 28.75% | $6,589 | 38 |
| 51 | Illinois | 14.76% | $8,011 | 37.66% | $8,162 | 43 |
*Assumes “Median U.S. Household” has an annual income of $54,286 (mean third quintile U.S. income); owns a home valued at $178,600 (median U.S. home value); owns a car valued at $23,070 (the highest-selling car of 2016); and spends annually an amount equal to the spending of a household earning the median U.S. income.
**National Average of State and Local Tax Rates = 10.72%.
***Assumes “Median State Household” has an annual income equal to the mean third quintile income of the state; owns a home at a value equal to the median of the state; owns a car valued at $23,070 (the highest-selling car of 2016); and spends annually an amount equal to the spending of a household earning the median state income.
