In this article, we will take a look at the 15 states with the highest tax revenue per capita. If you want to see more states in this selection, go to the 5 States with the Highest Tax Revenue Per Capita.
According to the United States Census Bureau, revenues from property, sales, gross receipts, and income taxes in aggregate rose by 15.9% to $513.3 billion in Q1 2022 from $442.9 billion in the corresponding period of 2021. In the US, state taxes vary widely and can include income taxes, sales taxes, property taxes, and various fees and excises. Some states, like Texas and Florida, do not have a state income tax, while others, like Vermont and California, have relatively high-income taxes. Additionally, states may impose various fees and excises, such as fuel taxes and tobacco taxes.
The tax-to-GDP ratio in the US rose by 0.8% from 25.8% in 2020 to 26.6% in 2021, according to the OECD’s annual Revenue Statistics report. Owing to inflation and the recovering economy, federal government revenue received a boost. Revenues from individual income taxes reached a peak of $2.04 trillion in the fiscal year 2021. The total amount of federal taxes collected, including payroll and others, reached a record high of $4.05 trillion in the 2021 fiscal year, which is equivalent to 18.1% of the GDP. This figure is higher than the average of 17.1% over the last 20 years prior to the Tax Cuts and Jobs Act. Overall, state taxes can have a significant impact on the cost of living and the corporate sector of an economy. Under the present United States tax laws, several prominent corporations are exempt from paying federal corporate income tax. As per the Institute on Taxation and Economic Policy, at least 55 of America’s largest corporations did not pay any federal corporate income tax on their profits earned in 2020. The corporations mentioned include popular companies like FedEx Corporation (NYSE:FDX), HP Inc. (NYSE:HPQ), and Salesforce, Inc. (NYSE:CRM).
Our Methodology
We have referred to the Federation of Tax Administrators (FTA) to collate data regarding the tax revenue per capita for 2021. The per capita measure is based on 2021 population estimates obtained from the US Census Bureau. Tax revenue per capita has been calculated by dividing the total tax collection by the total population. The states have been ranked in ascending order of the tax revenue per capita.
States with the Highest Tax Revenue Per Capita
15. Rhode Island
Total Tax Collection in 2021: $4.36 billion
Total Population: 1,095,453
Tax Revenue Per Capita: $3,981
Rhode Island has income tax ranging from 3.75% for an annual income of up to $68,200 to 5.99% for an annual income of more than $155,090. Furthermore, the Ocean State charges a 7% corporate income tax and a 7% state sales tax and does not impose a local sales tax. Groceries and clothing under $250 are exempted from the state sales tax. Rhode Island exempts military retirement income from tax as well. The government of Rhode Island charges a fixed motor fuel tax of 35 cents on every gallon of gasoline and diesel. Meanwhile, the state charges sin taxes of $4.25 on every pack of cigarettes and 11 cents on every gallon of beer.
14. Maryland
Total Tax Collection in 2021: $25.22 billion
Total Population: 6,164,996
Tax Revenue Per Capita: $4,091
Maryland charges a 6% sales tax, and there are no other local taxes. The lower end of income tax is 2% on income less than $1,000 and can go up to 5.75% for single filers with an annual income of more than $250,000. The Old Line State allows its 23 counties and Baltimore City to collect additional income taxes as well. The state also charges a 6% state levy, which does not apply to groceries and prescription drugs, but clothing is not exempted. The state charges a tax of 36.1 cents on every gallon of gasoline and 36.85 cents per gallon of diesel.
13. Oregon
Total Tax Collection in 2021: $17.80 billion
Total Population: 4,246,183
Tax Revenue Per Capita: $4,192
Oregon has a progressive income tax system, with rates ranging from 5% to 9.9%. The state also levies a sales tax of 0.5%. Oregon does not have a statewide property tax, but property taxes are collected by individual counties and cities. Oregon is one of the four US states that have no local or statewide sales taxes in place. Additionally, Oregon has a corporate income tax rate of 7.6%. The Oregon Department of Revenue has started to accept and process state tax returns from January 23. The state has allowed the free filing of state taxes through the Department of Revenue website. The state will start issuing refunds from February 15.
12. Washington
Total Tax Collection in 2021: $33.17 billion
Total Population: 7,738,045
Tax Revenue Per Capita: $4,287
The median property tax rate in the state of Washington is $836 per $100,000 of assessed home value. Experts term the rate of property tax as moderate compared to other states. The Evergreen State intends to impose a 7% tax on the sale or exchange of some long-term assets if they result in a profit of $250,000 or more. However, this tax has been challenged in the courts and has been ruled unconstitutional by a lower court. The Washington Supreme Court has put a hold on the decision and is reviewing the case. Washington is amongst the states that do not levy an income tax.
11. Illinois
Total Tax Collection in 2021: $55.53 billion
Total Population: 12,672,752
Tax Revenue Per Capita: $4,382
Illinois has a flat income tax rate of 4.95%. Some view this as favorable for the residents of the state. However, the median property tax in the Land of Lincoln is the second highest in the US. The state also has the eighth-highest average combined state and local taxes at 8.73%. Clothing, groceries, and prescribed pharmaceuticals are all taxed in the state of Illinois. From January 1, the state of Illinois has increased the motor fuel tax from 59.6 cents per gallon to 62.7 cents per gallon. Furthermore, the tax on diesel has been increased from 67.02 cents per gallon to 70.12 cents per gallon. These taxes make Illinois secure the eleventh position on our list of states with the highest tax revenue per capita.
10. New Jersey
Total Tax Collection in 2021: $43.68 billion
Total Population: 9,266,653
Tax Revenue Per Capita: $4,714
New Jersey is termed as one of the least tax-friendly states for middle-class families and retirees. The state has the highest median property tax across the US at $2,257 per $100,000 of assessed home value. This is because New Jersey is the fourth-smallest state in the US in terms of total area. The state has a progressive income tax structure and has a millionaire’s tax bracket of 10.75% on taxable income of more than $1 million. On the other hand, the lowest income tax rate is 1.4% on an annual taxable income of up to $20,000. New Jersey charges a 41.4 cents per gallon tax on gasoline and 48.4 cents per gallon tax on diesel.
9. New York
Total Tax Collection in 2021: $93.76 billion
Total Population: 19,833,933
Tax Revenue Per Capita: $4,727
New York has the tenth-highest cumulative state and local sales tax, along with the sixth-highest property tax in the US. The median property tax stands at $1,620 per $100,000 of assessed home value. The state has a progressive income tax structure that charges a 4% tax on individual annual taxable income of $8,500 and goes as high as 10.9% on annual taxable income of over $25 million. However, the state intends to lower the highest income tax rate to 8.82% from 2028 onwards. The state exempts groceries, prescription drugs, and clothing under $110 from sales tax. New York charges a tax of 48.22 cents per gallon on gasoline and 46.98 cents per gallon on diesel.
8. North Dakota
Total Tax Collection in 2021: $3.91 billion
Total Population: 774,980
Tax Revenue Per Capita: $5,044
North Dakota has a relatively simple tax system, with only a single state income tax rate and no state sales tax. The Peace Garden State has the lowest income tax rate of 1.1% for an annual income of up to $41,775 and the highest income tax rate of 2.9% on annual taxable income of over $458,350. However, there are some exemptions and deductions available, such as a property tax credit for homeowners and a deduction for certain business expenses. Additionally, certain types of income, such as interest from US government bonds, are not subject to state income tax in North Dakota. The state exempts groceries and prescription drugs from sales tax but charges sales tax on clothing.
7. Massachusetts
Total Tax Collection in 2021: $36.52 billion
Total Population: 6,984,509
Tax Revenue Per Capita: $5,229
Massachusetts has a flat 5% tax on federal adjusted gross income. However, a constitutional amendment has been approved following a public vote that will allow a 4% additional tax on annual taxable income of over $1 million from 2023 onwards. There are no local taxes and a 6.25% state levy. Groceries and prescription drugs are completely exempted from this state levy, along with clothing under $175. The median property tax stands at $1,115 per $100,000 of assessed home value. The state charges a tax of 26.54 cents per gallon of gasoline and diesel and levies a $3.51 per pack tax on cigarettes.
6. Delaware
Total Tax Collection in 2021: $5.40 billion
Total Population: 1,003,347
Tax Revenue Per Capita: $5,378
Delaware has a progressive income tax structure that starts at 2.2% and reaches a peak at 6.6%. Like other states on the list, the Blue Hen State does not charge taxes on social security benefits. The property tax is very low as it stands at $533 per $100,000 of assessed home value, the ninth lowest across the US. Meanwhile, the motor fuel tax is levied at 23 cents per gallon on gasoline and 22 cents per gallon on diesel. The state charges a sin tax of 26 cents per gallon on beer, $2.10 per pack on cigarettes, and $4.50 per gallon on liquor.
In addition to Delaware, Vermont, California, and Connecticut are also among the states with the highest tax revenue per capita as of 2021.
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Disclosure: None. 15 States with the Highest Tax Revenue Per Capita is originally published on Insider Monkey.
