- Days left

5 least tax-friendly states to live in

During tax season, it seems as if everyone thinks the grass is greener one (or in some instances, two) states over. Wonder whether your own envy is justified? Luckily, the Tax Foundation, a nonpartisan tax research group based in Washington, D.C., crunched some numbers to determine which states are the take the most from residents.

Unlike other "worst of" surveys, the Tax Foundation takes a number of criteria into consideration, including state and local income taxes, property taxes and local sales taxes. Other overviews, such as those based on the Census, may rely solely on state income tax revenue (hence the minor difference in ranking).

Below are the least tax-friendly states, according to the Tax Foundation's results. Worth noting is that the results were calculated based on information made available from the Tax Foundation for 2008, the last tax year for which state income tax data is completely available. Any recent changes, where significant, have been noted.

ALSO SEE: 5 most tax-friendly states to live in!

1. New Jersey. Not only does New Jersey have the worst team record in the NBA this year, they have the worst tax record as well. Taking into consideration state and local property, sales, and income taxes, those in the Garden State pay out a whopping 11.8% in taxes.

It was no surprise, then, that voters booted existing Governor John Corzine (D) out of office last fall in favor of GOP challenger Chris Christie. Voters cited the economy and the state's high tax burden as their biggest concerns -- a particularly timely gripe since taxes in the state had just gone up (again).

New Governor Christie initially received praise for his handling of what was, all agreed, a fairly substantial economic challenge. He cut spending and made some painful decisions on raising taxes to get the state's budget in order. But his "we're all in this together" stance took a beating when he refused to extend the tax rate to top earners.

Hopefully, the tax burden will turn around in the next four years ... or Christie may find himself joining in a revolving door of New Jersey governors.

2. New York. The Empire State just missed the dubious honor of getting the top spot with a total burden of 11.7% -- just 0.1% behind its neighbor, New Jersey. New York is generally regarded as an expensive place to live because of the cost associated with living in New York City, which has a total population of more than many states (about 19 million). But tax woes aren't limited to the city: The state of New York has been struggling to close an estimated $9 billion deficit. That means no tax cuts for residents. In fact, adding to its already high tax burden, New York is likely to see some additional taxes on everyday items shortly -- a tax on soda tops the list.

3. Connecticut. Connecticut has the advantage of being a fairly wealthy state, which means pretty good roads and schools, among other perks. The Constitution State reaps those funds from high-earning taxpayers, many of whom work in New York but want to live in a more suburban atmosphere. Unfortunately, suburbia doesn't come cheap. While Connecticut's state income tax is fairly average, the state more than makes up for it in high property taxes. Excise taxes on gas and cigarettes also figure in at the top. And of course, if you have rich taxpayers in your state, you'll want to tax them coming and going: Connecticut imposes an estate -- and gift -- tax.

4. Maryland. Maryland's struggle to balance its budget has been well documented over the past year, with emphasis on the consequences of its infamous "millionaire's tax." More so than other states that have implemented such a tax, Maryland is rumored to be losing taxpayers as a result of rising taxes. According to the data, one in eight millionaires who filed a Maryland tax return in 2007 filed no return in 2008. Despite the disappearing acts of its millionaires, Maryland will likely keep its surtaxes for the wealthy. The bigger question is whether it will keep its residents.

5. Hawaii. If there was an award for complicated tax systems, Hawaii would likely take the honor. The Aloha State's incredibly complex, tiered system consists of 12 brackets with a top rate of 11% kicking in at $200,000 for individual taxpayers ($400,000 for married taxpayers filing jointly). This makes Hawaii's state income tax rate the highest in the nation. Usually having a high top tax rate isn't enough to tip you into a top tax burden spot -- unless a significant portion of your taxpayers happen to be at the top to begin with ... and that's what has happened to Hawaiian taxpayers. An amazing 6.4% of Hawaii's households, or 28,363, are classed as millionaires, down from 2008 but still the highest proportion of millionaires of any state for the second year in a row.

Hawaiians also bear a relatively high burden when it comes to real estate taxes. But gosh, I'll bet those views are worth it.

Increase your money and finance knowledge from home

Understanding Credit Scores

Credit scores matter -- learn how to improve your score.

View Course »

Advice for Recent College Grads

Prepare yourself for the "real world".

View Course »

TurboTax Articles

Video: Tax Guidelines About Gifting

Note: Some of the content of this video applies only to taxes prepared prior to 2012. It is included here for reference only. Find out the tax guidelines about gifting with help from TurboTax in this video on tax tips.

Video: What are Income Tax Rates?

Note: The content of this video applies only to taxes prepared for 2010. It is included here for reference only. Income tax rates change depending on both the amount of money you make and how you made it. Find out about income tax rates with help from TurboTax in this video on tax tips.

Video: How To Reduce Errors on Your Tax Return

Did you know that errors on your tax return can affect the amount of your tax bill and the amount of time it takes to get a refund? Fortunately, TurboTax helps you avoid errors AND be sure you're getting all the tax deductions and credits you deserve.

Does Your Company Need to File Form 1095-B?

A company is responsible for filing IRS Form 1095-B only if two conditions apply: It offers health coverage to its employees, and it is "self-insured." This means that the company itself pays its employees' medical bills, rather than an insurance company. A company that doesn't meet both conditions won't have to deal with Form 1095-B. Its employees might still receive a 1095-B, but from their insurer, not the employer.

Video: Who Qualifies for an Affordable Care Act Exemption (Obamacare)?

The Affordable Care Act requires all Americans to have health insurance or pay a tax penalty. But, who qualifies for an Affordable Care Act exemption? Find out more about who qualifies for an exemption from the Affordable Care Act tax penalty, how to claim an exemption on your tax return and how the Affordable Care Act may affect your taxes with this video from TurboTax.

Add a Comment

*0 / 3000 Character Maximum