A new study published by Wallethub claims that a collection of wealthy blue states like California, Massachusetts and Maryland have a lower tax rate than states with a reputation for lower taxes like Texas, Indiana and Oklahoma.
The study claims that California is the twelfth lowest-taxed state in the union, with the District of Columbia at number 15, Massachusetts at 26 and Texas at 40. The top five lowest-taxed states, starting at number one, are: Alaska, Delaware , Montana, Nevada and Wyoming. The top five most taxed states, starting with number 45, are: Kansas, Pennsylvania, New York, Connecticut and Illinois.
To identify the states with the highest and lowest tax rates, WalletHub compared the 50 states and the District of Columbia on four types of taxes: property, vehicle, income, and sales taxes. The study compares these results with the national median.
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Problems with this methodology arise when states with wealthier residents who can better afford their high tax rates are listed as having a “lower tax rate” than poorer and middle-class states with lower taxes. For example, despite ranking No. 12 compared to No. 40 in Texas, 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.
In addition, the median household income in California is $95,207, giving the average Californian an income tax rate of 9.3%. With 55% of Californians owning a home that comes with a property tax of 0.71% and an average sales tax of 7.5%.
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Texas has no 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 that the average Texan, despite being 28 spots worse off in the study, 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 felt this difference in recent years. U-HAUL ranks California as the third fastest shrinking state, with Texas the fastest growing in terms of US relocations. Texas also tends to be at or near the top for the best states to own a company, while California consistently ranks at or near the bottom.
WalletHub did not respond for immediate comment
