In this article, we will look at the 15 States with the Highest Tax Burden in the US.
States with the Highest Tax Burden
The top marginal federal income tax rate remains unchanged from 2023 at 37%, as per the IRS. The other six federal tax rates are 10%, 12%, 22%, 24%, 32%, and 35%. The income tax is the major contributor to tax burdens in the US and also adds to the economic growth of the states. In the fiscal year 2024, the US federal government has collected $3.28 trillion in total taxes so far. Personal income taxes contributed 51% to the total taxes, accounting for $1.70 trillion, followed by social security and medicare taxes share of 34% at $1.13 trillion, as of July 5.
The minimum income tax rate is 10% in 2024, to be fulfilled by individuals with incomes of $11,600 or less. While, the maximum individual income tax rate of 37% applies to incomes ranging from $609,350 to $731,200 for individuals and married couples filing jointly, respectively. The state income tax returns are usually due at the same time as federal income tax returns on April 15. Whereas, some states may have different deadlines.
States with the highest tax burden also tend to have a higher state sales tax. The states with the highest tax burden have a higher sales tax rate than a 5.10% average state sales tax rate, as of 2024. Whereas, states with the lowest tax burden in the US have a lower sales tax rate than the average rate of 5.10%. South Dakota made a sales tax cut in 2023 which is expected to expire after 2026. New Mexico is another state that lowered its sales tax rate from 5.12% to 5% in July 2022.
On March 11, Reuters reported that the US government’s proposed budget by President Joe Biden would raise tax receipts by $4.95 trillion over 10 years, including tax increases of over $2.7 trillion on businesses and $2 trillion on wealthy individuals and estates. In addition, the IRS is also expanding its free tax filing program, Direct File, across the country in 2025. After a successful pilot, the IRS is implementing Direct File permanently and inviting all the states to offer a free filing option to their residents. In 2024, around 140,000 users successfully filed returns via Direct File across 12 states, saving approximately $5.6 million in tax preparation fees. On June 18, the IRS announced that Oregon will be the first new state to join the IRS Direct File in filing season 2025.
America’s Leading Tax Service Provider
H&R Block, Inc. (NYSE:HRB) is one of the top American tax service providers having the highest market capitalization among tax service companies in the US at $7.09 billion, as of July 5. The company assists individuals and firms with income tax return preparation. H&R Block, Inc. (NYSE:HRB) prepares around 12 million tax returns annually in the US, 6 million of which are online. H&R Block, Inc. (NYSE:HRB) offers tax service programs running from basic to premium and business. The basic tax service program is priced at $35 and the premium and business option can be availed at $99. In case the customers are unhappy with the service, H&R Block, Inc. (NYSE:HRB) claims to refund the full purchase price. In addition, if an error occurs from H&R Block, Inc.’s software, the company will reimburse the customer with penalties and interest up to a maximum of $10,000. H&R Block, Inc. (NYSE:HRB) offers free tax filing services to taxpayers who have W-2 income, parents who want to claim the Child Tax Credit, as well as students and first-time filers. The company also offers free returns to military service members through Military OneSource.
H&R Block, Inc. (NYSE:HRB) is trading at its all-time high with a day’s trading range of $55.18 – $56.63, as of July 3. The stock has soared since it reported its third quarter 2024 earnings on May 8. H&R Block, Inc. (NYSE:HRB) posted earnings per share of $4.94, surpassing the estimates by $0.33. The revenue increased by 4% year over year to $2.2 billion in Q3 2024, beating consensus estimates by $47.37 million. The company services value from stable revenue and strong dividend yield. In Q3 2024, H&R Block, Inc. (NYSE:HRB) revenue increased by 4%, EBITDA grew 6% and EPS grew 18% over the previous quarter. The company benefited from DIY volume growth and ongoing disciplined expense management, especially the DIY growth significantly outpaced the DIY category. Through April 30, paid volumes soared 6% and the majority of the files came from TurboTax. In addition, the company is working on AI assistance and making notable ground. Here are some of the comments from the Q3 2024 earnings call:
“Our Gen AI-powered AI tax assist performed well. As we’ve shared, this innovation was launched for the first time this year. Feedback indicated that the tool was easy to use and helpful in the tax prep process and clients found value-added. Importantly, we saw greater conversion among new clients who leveraged AI tax assist. Both AI tax assist and human help were included at no additional charge in all of our DIY paid online SKUs which we believe is a competitive differentiator. As a result, we exceeded our operational metrics with human help and believe this combination provides clients with the confidence they need in DIY. We also continue to see more DIY clients accessing human help with Tax Pro Review which grew more than 15%, continuing its multiyear trend of double-digit annual growth.”
H&R Block, Inc. (NYSE:HRB) growth is backed by strong development in its core business. H&R Block, Inc. (NYSE:HRB) has a Price-to-Earnings (PE) ratio of almost 13, lower than the industry average of 15, which highlights the undervalued nature of the stock. In addition, H&R Block, Inc. (NYSE:HRB) has a dividend payout history since 1972 and offers a strong dividend yield of 2.31%, making it attractive for investors looking for passive income stocks.
The stock trades around its all-time high and has the potential to grow further. However, H&R Block, Inc. (NYSE:HRB) shares are trading higher than the analyst average price target of $53. Moreover, H&R Block Inc.’s CEO Jeff Jones sold 44,975 shares for an average price of $54.55 as part of a trading plan, as per the SEC filing on July 1. Jones still owns 712,386 shares in the company. Jonathan Tepper’s hedge fund Prevatt Capital has increased its holdings by 28% in H&R Block, Inc. (NYSE:HRB), valued stake of $22.59 million. Ken Griffin’s Citadel Investment Group has increased its stake in the tax company by 94%, as of March 15.
Now that we have discussed the state tax burdens in the US and the top valued tax service company, let’s now talk about the 15 states with the highest tax burden in the US.
15 States with the Highest Tax Burden in the US
Our Methodology
To compile our list of the 15 states with the highest tax burden in the US, we gathered tax rates data from the Tax Foundation. We have considered the top personal income tax, sales tax, and property tax rates for each state, as of 2024. We have calculated each state’s tax burden by adding all the taxes and finding the total taxes paid against the average individual income of the state. We have ranked states in ascending order of their tax burden. The data for average individual income for each state was taken from Forbes.
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15 States with the Highest Tax Burden in the US
15. Iowa
State Tax Burden: 13.22%
Income Tax: 5.70%
Sales Tax: 6%
Property Tax: 1.52%
Iowa has a graduated individual income tax, with rates ranging from 4.40% to 5.70%, and a sales tax of 6%. With a state tax burden of 13.22%, Iowa ranks 15th among the states with the highest tax burden in the US.
14. Nebraska
State Tax Burden: 13.47%
Income Tax: 5.84%
Sales Tax: 6%
Property Tax: 1.63%
Nebraska has a tax burden of 13.47% with a sales tax of 6% and a graduated income tax, ranging from 2.46% to 5.84%. Nebraska is one of the states with the highest tax burden in the US.
13. Kansas
State Tax Burden: 14.04%
Income Tax: 5.70%
Sales Tax: 7%
Property Tax: 1.34%
Kansas has one of the highest sales tax rates at 7%. The state has graduated income tax rates from 2.70% to 5.70%.
12. Wisconsin
State Tax Burden: 14.26%
Income Tax: 7.65%
Sales Tax: 5%
Property Tax: 1.61%
Wisconsin ranks 12th among the states with the highest tax burden in the US, with a state tax burden of 14.26%. Wisconsin has a graduated individual income tax, with rates ranging from 3.50% to 7.65%.
11. Maine
State Tax Burden: 14.39%
Income Tax: 7.15%
Sales Tax: 6%
Property Tax: 1.24%
Maine has graduated income tax rates ranging from 5.80% to 7.15%. With a tax burden of 14.39%, Maine ranks among the states with the highest tax burden in the US.
10. Rhode Island
State Tax Burden: 14.39%
Income Tax: 5.99%
Sales Tax: 7%
Property Tax: 1.40%
Rhode Island ranks 10th among the states with the highest tax burden in the US. Rhode Island has a high sales tax rate of 7% and a graduated income tax rate between 3.57% and 5.99%.
9. Connecticut
State Tax Burden: 14.78%
Income Tax: 6.99%
Sales Tax: 6%
Property Tax: 1.79%
Connecticut has a high property tax rate among most states and a 6% sales tax rate. Connecticut’s individual income tax rate ranges between 2% and 6.99%.
8. Hawaii
State Tax Burden: 15.32%
Income Tax: 11%
Sales Tax: 4%
Property Tax: 0.32%
Hawaii is one of the states with the highest income tax rates in the US, with rates ranging from as low as 1.40% to 11%. Hawaii ranks eighth among the states with the highest tax burden in the US.
7. Massachusetts
State Tax Burden: 16.14%
Income Tax: 9%
Sales Tax: 6%
Property Tax: 1.14%
Massachusetts has a tax burden of 16.14%. The state’s sales tax is 6% and income tax ranges from 5% to 9%.
6. New York
State Tax Burden: 16.30%
Income Tax: 10.90%
Sales Tax: 4%
Property Tax: 1.40%
New York also has a high-income tax rate ranging from 4% to 10.90%. New York ranks sixth among the states with the highest tax burden in the US.
5. Vermont
State Tax Burden: 16.58%
Income Tax: 8.75%
Sales Tax: 6%
Property Tax: 1.83%
Vermont has a tax burden of 16.58% and ranks fifth among the states with the highest tax burden in the US. Vermont has an income tax rate ranging from 3.35% to 8.75%.
4. District of Columbia
State Tax Burden: 17.37%
Income Tax: 10.75%
Sales Tax: 6%
Property Tax: 0.62%
The District of Columbia has a 6% sales tax rate and an individual tax rate ranging from 4% to 10.75%.
3. Minnesota
State Tax Burden: 17.96%
Income Tax: 9.85%
Sales Tax: 7%
Property Tax: 1.11%
Minnesota has one of the highest income and sales tax rates in the US. With a state tax burden of 17.96%, Minnesota ranks third among the states with the highest tax burden in the US.
2. New Jersey
State Tax Burden: 19.98%
Income Tax: 10.75%
Sales Tax: 7%
Property Tax: 2.23%
New Jersey is the second most tax-burdened state in the US. New Jersey has a sales tax of 7% and a graduated income tax rate ranging from 1.40% to 10.75%.
1. California
State Tax Burden: 22.40%
Income Tax: 14.40%
Sales Tax: 7.25%
Property Tax: 0.75%
California has the highest top individual income tax rate of 14.40%, while the lowest income tax rate is 1%. There are nine state income tax brackets in California. The state implies a progressive tax structure, which means the more you earn, the higher your tax rate is. The 1% income tax is imposed on income ranging from $0 to $10,412. Other tax brackets include tax rates of 2%, 4%, 6%, 8%, 9.30%, 10.30%, 11.30%, and 12.30%. The 12.30% individual income tax rate is applicable on income equal to $698,272 or more. For married couples filing jointly, the highest tax rate of 12.30% is imposed on income equal to $1,396,542 or more.
The standard deductions in California for 2023 tax returns are $5,363 for individual or married couples filing separately and $10,726 for married couples filing jointly. California has a state sales tax of 7.25%. Many cities and counties also levy a local sales tax, which can increase the total sales tax rate up to 10.75%. With a total tax burden of 22.40%, California has the highest tax burden in the US in 2024.
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