A new study released by Wallethub claims a collection of wealthy blue states like California, Massachusetts, and Maryland have a lower tax rate than states with reputations for lower taxes such as Texas, Indiana, and Oklahoma.
The study claims that California is the twelfth lowest-taxed state in the union with the District of Columbia coming in at number 15, Massachusetts at 26, and Texas at 40th. The top five lowest-taxed states, starting at number one, are: Alaska, Delaware, Montana, Nevada, and Wyoming. The top five highest taxed states, started with number 45, are: Kansas, Pennsylvania, New York, Conneticut, and Illinois.
In order to identify the states with the highest and lowest tax rates, WalletHub compared the 50 states and the District of Columbia across four types of taxation: real estate, vehicle, income, and sales tax. The study compares these results to the national median.
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Issues with this methodology arise when states with wealthier residents who can better afford their high tax rates get listed as having a “lower tax rate” than poorer and middle class states with less taxes. For instance, despite being listed as number 12 compared to Texas’ 40th spot, the average Californian paid $9,612 in taxes compared to the average Texan’s $8,006. Even more dramatically, despite being only three spots below Texas, New Jersey residents paid $12,652.
Additionally, the average California household income is $95,207 which puts the average Californian at a state income tax rate of 9.3%. With 55% of Californians owning a home that comes with a property tax of .71% and an average sales tax of 7.5%.
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Texas does not have an income tax at all, and with 62.5% of Texans owning a home, that comes with a property tax rate of 1.60% and an average sales tax of 6.25%.
This means, despite being 28 spots worse off in the study, the average Texan has a cumulative tax rate of 7.85% and the average Californian has a cumulative tax rate of 17.51%.
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Americans have been feeling this difference in past years. U-HAUL ranks California as the third-fastest shrinking state with Texas being the fastest growing in terms of Americans moving. Texas also tends to rank at or near the top for best states in which to own a business, while California consistently ranks at or near the bottom.
WalletHub did not respond for immediate comment
