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The Uneven Landscape of State Taxes

How much will you pay? That depends on location, location, location

A chalkboard outline of the United States with an unbalanced seesaw between the word tax and a drawing of a family and a house

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You may dream of moving to a state with lower taxes, now or when you retire. But while the grass may seem greener somewhere else, you might not save as much green as expected. To evaluate the financial scenario of another state, make sure you include a variety of taxes you might pay. “Many people focus solely on income taxes, sales taxes or property taxes and don’t consider the interplay between them all,” says John P. Schultz, a California tax accountant who chairs CalCPA’s tax committee.​

For example, because of the state’s 13.3 percent tax bracket for its highest earners, California has a high-tax reputation. But taxes for middle-income people are lower, says Carl Davis, research director for the Institute on Taxation and Economic Policy. 

“Florida and Texas get held up as low-tax states,” Davis notes. “That’s pretty much always true at the very top. It’s often not true for lower-income families. And in the middle, it’s complicated.” 

To give you an idea of how a tax burden can vary based on geography and wealth, we created three hypothetical households at three income levels, then estimated their tax burdens in three different states, with the help of several tax professionals and other data sources. Here’s how we came up with our estimates, which do not include federal taxes.​

Income tax: Tax professionals in California and Illinois prepared returns based on rules for tax year 2020. (Florida has no income tax.) Calculations assumed that households made no retirement-plan contributions that might have lowered their tax bill.​

Property tax: Rates are drawn from Tax Foundation averages based on Census Bureau data. Note that laws in California, Florida and the Chicago area (home to 41 percent of Illinois residents) may result in longtime homeowners paying lower taxes than new arrivals living in homes of the same value.​

Sales tax: Amounts are drawn from IRS tables for federal tax deductions for a typical area within the state (local rates may vary). Those tables take into account a household’s adjusted gross income and number of members.​

married couple illustration

Illustration: Albert Tercero

 

Household:

Alberto 56, and Mercedes, 54

Wages:

$70,000

Home value:

$300,000 

 

 

State Income tax Sales tax Property tax Total  % of income
California $2000 $938* $2,100 $5,038 7.2%
Illinois $2,939 $1,327 $5,910 $10,176 14.5%
Florida $0 $1,044 $2,580 $3,624 5.2%

cartoon family of four with mom dad and two kids

Illustration: Albert Tercero

 

Household:

Darrell, 52, Yvonne, 51, Diana, 18, Makayla, 16

Wages:

$150,000

Dividend income:

$5,000

Home value:

$450,000 

State Income tax Sales tax Property tax Total  % of income
California $6,800 $1,378  $3,150 $11,328 7.3%
Illinois $6,274 $1,961 $8,865 $17,100 11%
Florida $0 $1,447 $3,870 $5,317 3.4%

cartoon of single woman in front of an apartment high rise building

Illustration: Albert Tercero

 

Household: 

Lisa, 59

Wages:

$30,000

Rents her apartment
 

 

 

State Income tax Sales tax Property tax Total  % of income
California $183 $616 $0 $799 2.7%
Illinois $1,370 $870 $0 $2,240 7.5%
Florida $0 $634 $0 $634 2.1%


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​Sources: The following provided information and insight for this story: Joseph F. Bigane III, managing director, JFB Tax Consulting (Illinois); Carl Davis, research director, Institute on Taxation and Economic Policy; Brian Gottschalk, tax partner, GellerRagans (Florida); John P. Schultz, partner, Genske, Mulder & Company (California).