The 10 Least Tax-Friendly States for Middle-Class Families
It can cost you thousands of dollars each year if you fail to consider state and local taxes before moving your family from one state to another.
If you pull up stakes and move from one state to another, your federal income tax bill won't change just because you crossed a state line. But the same can't be said about your overall state and local tax liability. Moving from a low-tax state to a high-tax state can literally cost you thousands of dollars each year. Your income, sales, property, and other state and local taxes can all be higher in your new location. That's why people who are contemplating a move to a different state need to do their homework before hiring the movers.
If you don't want to end up in a state with higher taxes than the one you're in right now, one of the first things you need to know is which states to avoid. And we can help with that. When creating our State-by-State Guide to Taxes on Middle-Class Families, we estimated the overall income, sales, and property tax burden in each state and the District of Columbia for a hypothetical married couple with two children, combined wages of $77,000, $3,000 of other income, and a $300,000 home. That information also allowed us to cobble together the following list of the 10 least tax-friendly states for middle-class families (the least-friendly state is listed last). So, if you and your family are considering packing your bags and moving to another state, make sure you check out the list before finalizing your decision. It might make you think twice before relocating.
See the final slide for a complete description of our ranking methodology and sources of information.
10. Michigan
- State Income Tax Range: 4.25% (flat rate)
- Average Combined State and Local Sales Tax Rate: 6%
- Median Property Tax Rate: $1,501 per $100,000 of assessed home value
First, the good news: Sales taxes are below average in the Great Lakes State. There's a 6% state tax on purchases in Michigan, which is a little on the high side as far as state-level sales tax rates go. But local governments don't add any additional tax on sales in the state. So, shoppers in Michigan can feel pretty good about the overall state and local sales tax burden on them.
Now for some bad news: The 4.25% flat rate is higher than what you'll find on middle-class families in most other states. Plus, cities can levy additional local income taxes. As a result, Michigan's income tax bill for our hypothetical family is a above the national average. Not by much, but the extra tax burden is enough to nudge the state in the wrong direction.
And there's more to worry about when we look at property taxes in Michigan. For a home worth $300,000, the estimated annual property tax in Michigan is $4,503. That property tax amount is well over the national average and pushes Michigan onto this list of the least tax-friendly states for middle-class families.
For more information on these and other Michigan state taxes, see the Michigan State Tax Guide for Middle-Class Families.
9. Nebraska
- State Income Tax Range: 2.46% (on taxable income up to $3,340 for single filers; up to $6,660 for joint filers) to 6.84% (on taxable income over $32,210 for single filers; over $64,430 for joint filers) (Note: The thresholds listed are for the 2021 tax year, since the 2022 figures are not yet available)
- Average Combined State and Local Sales Tax Rate: 6.94%
- Median Property Tax Rate: $1,684 per $100,000 of assessed home value
While the cost of housing is comparatively low in the Cornhusker State, the average property tax rate in the state is rather high. For a $300,000 home, the state-wide average tax in Nebraska comes to $5,052 per year. That's the ninth-highest property tax amount in our U.S. rankings, and it's the primary reason why Nebraska is on the least tax-friendly list.
Sales taxes in Nebraska are middle-of-the-road. There's a 5.5% state tax, and localities can add as much as 2.5%. That works out to an average combined state and local rate of 6.94%, according to the Tax Foundation.
Finally, on the bright side, income taxes are below average in Nebraska for our hypothetical middle-class family. Plus, beginning in 2023, the top rate is gradually reduced according to the following schedule: 6.64% in 2023, 6.44% in 2024, 6.24% in 2025, 6% in 2026, and 5.84% in 2027 and thereafter. That will helps some in future years. However, the current rates are not low enough to balance out the state's high property taxes.
For more information on these and other Nebraska state taxes, see the Nebraska State Tax Guide for Middle-Class Families.
8. Wisconsin
- State Income Tax Range: 3.54% (on taxable income up to $12,120 for single filers; up to $16,160 for joint filers) to 7.65% (on taxable income over $266,930 for singles; over $355,910 for joint filers) (Note: The thresholds listed are for the 2021 tax year, since the 2022 figures are not yet available)
- Average Combined State and Local Sales Tax Rate: 5.43%
- Median Property Tax Rate: $1,781 per $100,000 of assessed home value
The Badger State owes its spot on our list of the least tax-friendly states for middle-class families to high property taxes. We estimate that property taxes for a $300,000 home in Wisconsin would average out to about $5,343 per year. That's the sixth-highest property tax amount in our nation-wide rankings.
Income taxes are about average for middle-class families in Wisconsin. Starting in 2021, the state reduced the income tax rate that applies to most middle-income taxpayers. But the rate cut didn't help our imaginary middle-class family enough to offset the high property taxes.
The good news is that sales taxes are actually low in Wisconsin. There's a 5% state sales tax, but local governments can add their own tax to it. Overall, however, Wisconsin has the ninth-lowest combined average state and local tax rate in the nation, says the Tax Foundation.
For more information on these and other Wisconsin state taxes, see the Wisconsin State Tax Guide for Middle-Class Families.
7. Maryland
- State Income Tax Range: 2% (on taxable income up to $1,000) to 5.75% (on taxable income over $250,000 for single filers; over $300,000 for joint filers)
- Average Combined State and Local Sales Tax Rate: 6%
- Median Property Tax Rate: $1,078 per $100,000 of assessed home value
Middle-class families in the Old Line State get killed when it comes to state and local income taxes. (Baltimore City and every county in Maryland imposes a local income tax.) For our hypothetical family, Maryland's income tax bill is the highest is the country.
The news is better when it comes to property taxes. If our made-up family moved into a $300,000 home in Maryland, they'd pay an estimated $3,234 in tax each year if the state's median property tax rate were applied. That property tax amount is pretty close to the national average that we're seeing in our survey.
The Maryland tax system is actually quite friendly to shoppers, though. Like Michigan, there's a 6% state sales tax, but that's it – there are no additional local sales taxes to pay. That means the overall state and local sales tax burden on Marylanders is below average.
For more information on these and other Maryland state taxes, see the Maryland State Tax Guide for Middle-Class Families.
6. Kansas
- State Income Tax Range: 3.1% (on taxable income from $2,501 to $15,000 for single filers; from $5,001 to $30,000 for joint filers) to 5.7% (on taxable income over $30,000 for single filers; over $60,000 for joint filers).
- Average Combined State and Local Sales Tax Rate: 8.7%
- Median Property Tax Rate: $1,411 per $100,000 of assessed home value
Most people don't think of the farm belt as a high-tax area, but here's another state from that region on our least tax-friendly list (Nebraska was the first). With Kansas, its sales tax is the main culprit behind its poor (from a taxpayer standpoint) showing. According to the Tax Foundation, the combined average state and local sales tax rate is 8.7% (the state rate is 6.5%). That's the ninth-highest combined sales tax rate in the country. On the bright side, Kansas will start phasing-out its sales tax on groceries starting in 2023, which should help some.
Things get a little better when it comes to other taxes in the Sunflower State...but the news certainly isn't great. For instance, income taxes are still above average for middle-class families. Plus, hundreds of local governments in Kansas also impose a tax on interest, dividends, and other earnings from intangible property. The local rates range from 0.125% to 2.25%. Even though the local taxes aren't on all income, they certainly push up the overall tax burden for many families in the state.
Property taxes in Kansas are above average, too. If our hypothetical family moved to Kansas and bought a $300,000 home in the state, they would pay about $4,233 in property taxes each year based on the state's median tax rate. That's the 15th-highest amount in the country for a home at that value.
For more information on these and other Kansas state taxes, see the Kansas State Tax Guide for Middle-Class Families.
5. New York
- State Income Tax Range: 4% (on taxable income up to $8,500 for single filers; up to $17,150 for joint filers) to 10.9% (on taxable income over $25 million)
- Average Combined State and Local Sales Tax Rate: 8.52%
- Median Property Tax Rate: $1,720 per $100,000 of assessed home value
For our hypothetical middle-class family, New York's income tax bill is only in the "average" range when compared to the taxes imposed by other states. However, New York City and Yonkers tack on their own income taxes, and there's a commuter tax for people working in and around New York City. So, the overall state and local income tax bill is higher for people living in those parts of the state.
While income taxes in the Empire State aren't too high for middle-class families, things start to get bad when you look at sales taxes. The state sales tax rate is only 4%. But local taxes can add as much as 4.875% more. At 8.52%, New York's average combined state and local sales tax rate is the 10th-highest in the country, according to the Tax Foundation.
And then things go from bad to worse when property taxes are added to the mix. The average property tax on a $300,000 home in New York is about $5,160, which is the eighth-highest property tax amount in the country for a home worth that much. But in some high-cost parts of the state, such as Westchester County, homeowners pay more than twice that amount.
For more information on these and other New York state taxes, see the New York State Tax Guide for Middle-Class Families.
4. New Jersey
- State Income Tax Range: 1.4% (on taxable income up to $20,000) to 10.75% (on taxable income over $1 million)
- Average Combined State and Local Sales Tax Rate: 6.6%
- Median Property Tax Rate: $2,471 per $100,000 of assessed home value
For middle-class families in the Garden State, income taxes are relatively low when compared with other states. New Jersey checked with the fourth-lowest income tax total out of all the states with a broad-based income tax when we calculated income tax bills for our hypothetical family. (There's also a payroll tax in Newark.)
Sales taxes are below average in New Jersey, too. The state sales tax rate is 6.625%. But because some areas charge only half the state rate on certain sales, the Tax Foundation says that New Jersey's average state and local combined sales tax rate is only 6.6%.
But while New Jersey gives residents a break on income and sales taxes, it brings the hammer down when they buy a home. New Jersey's property taxes are the highest in the U.S. The state-wide average property tax on a $300,000 home in New Jersey comes to a whopping $7,413.
For more information on these and other New Jersey state taxes, see the New Jersey State Tax Guide for Middle-Class Families.
3. Iowa
- State Income Tax Range: 0.33% (on taxable income up to $1,743) to 8.53% (on taxable income over $78,435)
- Average Combined State and Local Sales Tax Rate: 6.94%
- Median Property Tax Rate: $1,561 per $100,000 of assessed home value
Which do you think is higher in Iowa: the corn or taxes? It might be taxes, thanks to staggering income and property taxes in the state. Iowa's current income tax on our hypothetical middle-class family is the third-highest in the country. One reason why income taxes are on the high end in the state is because over 200 school districts and Appanoose County add their own income taxes on top of the state-level tax. At least things will get better in the future. The top state income tax rate will go down over a period of years starting in 2023, and then a flat rate of 3.9% will apply beginning in 2026.
Our survey also shows that the median property tax rate in the Hawkeye State is the 11th-highest in the nation. If our hypothetical family bought a $300,000 home in the state, they can expect to pay about $4,683 per year in property taxes. That certainly doesn't help middle-class families in Iowa.
While sales taxes in Iowa aren't low, at least they're not as high as the state's income and property taxes. The state sales tax rate is 6%, and localities can add as much as 1%. That puts Iowa's combined average state and local sales tax rate (6.94%, according to the Tax Foundation) in the middle-of-the-pack when compared to the rates in other states.
For more information on these and other Iowa state taxes, see the Iowa State Tax Guide for Middle-Class Families.
2. Connecticut
- State Income Tax Range: 3% (on taxable income up to $10,000 for single filers; up to $20,000 for joint filers) to 6.99% (on taxable income over $500,000 for single filers; over $1 million for joint filers)
- Average Combined State and Local Sales Tax Rate: 6.35%
- Median Property Tax Rate: $2,133 per $100,000 of assessed home value
The Constitution State is an expensive place to live. And, from a tax perspective, it starts with the state's real estate taxes. Connecticut's state-wide average property tax for a $300,000 home is $6,399 per year. That's the third-highest in the U.S. However, residents in high-income areas such as Fairfield County often pay more than $10,000 in property taxes each year.
State income taxes on are the high end, too. Connecticut income taxes for our make-believe middle-class are above average, but not sky high.
Sales taxes are also reasonable in Connecticut. There are no local sales taxes in the state, so you'll pay only the statewide rate of 6.35% (slightly below average) on most of your purchases. But luxury items, such as cars valued at $50,000 or more or jewelry worth more than $5,000, are taxed at 7.75%.
For more information on these and other Connecticut state taxes, see the Connecticut State Tax Guide for Middle-Class Families.
1. Illinois
- State Income Tax Range: 4.95% (flat rate)
- Average Combined State and Local Sales Tax Rate: 8.81%
- Median Property Tax Rate: $2,241 per $100,000 of assessed home value
Sorry, Illinois, but you're the least tax-friendly state in the country for middle-class families. For all three taxes we're tracking – income, sales, and property taxes – you tax middle-income residents at an above average rate (at least). And for one of those taxes, the rates are extremely high. That's enough to put the Land of Lincoln in the most undesirable spot on our list.
At first blush, the state's 4.95% flat income tax rate doesn't seem that steep when compared to other states' top tax rates. And that's true if you're talking about wealthy residents. But for middle-class taxpayers, the income tax rate is on the high end. When we ran tax returns for all 50 states and the District of Columbia for our hypothetical middle-class family, the Illinois income tax bill was tied for the ninth-highest in the country.
Sales taxes in Illinois are high, too. There's a 6.25% state tax on purchases in Illinois (1% on groceries and prescription drugs). Plus, up to 4.75% in local taxes are tacked on in certain places within the state. All told, the average combined state and local sales tax in Illinois is 8.81%, which is the eighth-highest combined sales tax rate in the U.S. (Note that the state tax on groceries is suspended from July 1, 2022, to June 30, 2023.)
The tax situation really goes downhill fast for Illinois residents when you look at the property taxes they have to pay. If you look at the statewide median tax rate, property taxes in Illinois are the second-highest in the nation. If our hypothetical family purchased a $300,000 home in the state, their average annual property tax bill would be an eye-popping $6,723.
For more information on these and other Illinois state taxes, see the Illinois State Tax Guide for Middle-Class Families.
About Our Methodology
Our tax maps and related tax content include data from a wide range of sources. To generate our rankings, we created a metric to compare the tax burden in all 50 states and the District of Columbia.
Data sources:
Income tax – Our income tax information comes from each state's tax agency. Income tax forms and instructions were also used. Unless otherwise noted, the rates and threshold amounts listed are for the 2022 tax year. See more about how we calculated the income tax for our hypothetical family below under "Ranking method."
Property tax – The median property tax rate is based on the median property taxes paid and the median home value in each state for 2020 (the most recent year available). The data comes from the U.S. Census Bureau. By using data on taxes actually paid and median home values, differences between the cost of housing from one state to another are factored into the equation (although the median property tax rate is still a statewide figure).
Sales tax – State sales tax rates are from each state's tax agency. We also cite the Tax Foundation's 2022 average combined sales tax rate, which is a population-weighted average of state and local sales taxes. In states that let local governments add sales taxes, this gives an estimate of what most people in a given state actually pay, as those rates can vary widely.
Ranking method
The "tax-friendliness" of a state depends on the sum of income, sales and property tax paid by our hypothetical family.
To determine income tax, we prepared tax returns for each state and the District of Columbia for a married couple with two dependent children, an earned income of $77,000, long-term capital gains of $1,500, qualified dividends of $1,000, and taxable interest of $500. They had $4,500 in state income taxes withheld from their wages. They also paid $3,000 in real estate taxes, paid $2,800 in mortgage interest, and donated $2,300 (cash and property) to charity. We calculated these 2020 returns using software from Credit Karma (some adjustments were made to account for certain 2021 tax law changes).
How much they paid in sales taxes was calculated using the sales tax deduction tables in the instructions for federal Schedule A (Form 1040) and the Tax Foundation's 2021 midyear average combined sales tax rates.
How much the hypothetical family paid (and deducted on their income tax return) in property taxes was calculated by assuming a residence with $300,000 assessed value and then applying each state's median property tax rate to that amount.
