In this article, we will look at 5 Least Tax Friendly States for Middle-Class Families. In another article, we have also discussed the latest tax brackets and the companies cooperating with tax filing in the US. If you are interesting in reading that, head straight to 15 Least Tax Friendly States for Middle-Class Families.
5. New Jersey
Income Tax: 6.37%
Sales Tax: 6.625%
Weighted Average Tax: 6.47%
The state has high property taxes, income taxes, and sales taxes. These tax burdens, combined with a high cost of living, pose challenges for middle-class families. The imposed high taxes limit disposable income, making it harder to meet everyday expenses and achieve financial stability.
4. Minnesota
Income Tax: 6.80%
Sales Tax: 6.875%
Weighted Average Tax: 6.83%
Minnesota stands out as an outlier with its tax rates ranking among the top ten highest in the nation for both individual and corporate taxpayers. It is also one of the twelve states that still impose an estate tax. These tax burdens act as barriers to economic growth, as high tax rates undermine investment, entrepreneurship, and the attraction and retention of talented individuals — essential components for cultivating a robust private sector growth.
3. Hawaii
Income Tax: 9%
Sales Tax: 4%
Weighted Average Tax: 7%
Hawaii has the third-highest state budget per capita in the country, at an impressive number of $12,896. However, this figure also includes unfunded liabilities amounting to approximately $97 billion. Unfortunately, these consequences of excessive government spending and liabilities are borne by the residents of Hawaii, who face the highest per-capita state tax revenues nationwide.
Hawai also has the second-highest individual income tax rate and shares the highest estate tax rate with Washington. While property tax rates remain low, the high value of homes leads to average payments similar to the national average. Furthermore, Hawaii’s general excise tax is recognized as the most burdensome in the nation that places a disproportionate burden on low-income residents and contributes to higher healthcare costs.
2. District of Columbia (DC)
Income Tax: 8.5%
Sales Tax: 6%
Weighted Average Tax: 7.5%
Income tax in Washington, D.C. is relatively high because of the city’s unique status as both a city and a state, which allows it to levy its own taxes. The need to generate revenue for various services and programs contributes to the higher income tax rates in the region. Moreover, taxes in DC with the high cost of living, makes it even more challenging for middle class families to make ends meet.
1. California
Income Tax: 9.3%
Sales Tax: 7.25%
Weighted Average Tax: 8.48%
California has the highest state sales tax rates in the country. In certain areas of the state, the total sales tax rate can reach as high as 10.75%, while Los Angeles currently maintains a total rate of 9.5 percent (as of April 1, 2023). California also imposes an 8.84 percent corporate income tax rate, making it even the most tax unfriendly state for corporations. Regardless, there’s a lot of corporations in California, particularly tech corporations in the silicon valley, due to a huge talent pool. According to Tax Foundation, the average combined state and local sales tax rate in California stands at 8.82 percent.
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