We all hate paying taxes, but unfortunately, we cannot escape lest the government charges us with tax evasion. Different states have different rates for taxes, and sometimes people move from one state to another due to high taxes imposed on them. The charges mainly comprise of income tax and sales tax. When highly taxed, businesses will attract a small profit margin, and that is why it is hard to do business in a state with high taxes. Although the taxes are used in the construction of social amenities, many people still do not find the taxation system to be fair. If you are planning to move, here are the ten worst states for taxes that you might want to avoid, based on the income tax rate.
10. Idaho: 7.4%
Idaho taxes income at a flat rate of 7.4%. The state also charges a minimum of $20 corporation tax, sales tax of 6% and a charge of $10 when one files their returns. According to the Smart Asset, Idaho does not tax social security retirement benefits. Non-taxable social security benefits make Idaho one of the best place to retire since retirees will have a chance to enjoy their retirement benefits in full.
9. Maine: 7.95%
Residing in Maine comes with the responsibility of paying 7.95% of your income tax and a 5.5% sales tax. The income tax is not fixed but is divided into categories. The higher the income, the higher the rate of tax. Sales tax in Maine also does not apply to all organizations and institutions. Churches, libraries, schools, and hospitals do not pay sales tax.
8. New York: 8.82%
You might be surprised to find New York in this list despite the number of people living there. One of the main reason why people are moving out of New York is taxes. The income tax stands at the rate of 8.82% and the sales tax at 4%. When this high-income tax combines with the high cost of living, then New York becomes an option only for those with big paychecks.
7. Washington DC: 8.95%
Being the state with the headquarters of the United States, Washington DC is among the states with the highest tax rates. It imposes to its residents an income tax rate of 8.95% and a sales tax rate of 6%. Washington DC only imposes a tax on property worth more than $1 million and has no inheritance tax. The good thing with Washington DC is that there are plenty of jobs in the state but upon securing one, be ready to comply with their tax rates.
6. New Jersey: 8.97%
Residents of New Jersey have an obligation of 8.97% income tax and 7% sales tax. One shocking thing is that the tax on properties is exceptionally high. Compared to other states in the nation, the property tax in New Jersey is the highest. If you are planning to invest in real estate, then New Jersey might not be the ideal place.
5. Iowa: 8.98%
Iowa is a state known for flat lands and cornfields. If you happen to have a job in Iowa, then you are staring at an income tax of 8.98%, and when you purchase anything, a sales tax of 6% applies. The property taxes are relatively higher in Iowa, ranking as the fourteenth highest rate in the U.S. They may discourage investments despite the flatlands being attractive for real estate.
4. Minnesota: 9.85%
Minnesota has a rate of 9.85% on the income tax and 8.375% on sales tax. The property tax is average going at a rate of 1.15%. The tax rates in Minnesota are dependent on home value, spending habits, and the income level. The income tax applies to the taxable income and not the gross income. Minnesota might not be the right place for retirees since they tax the social benefits at the same rates as the federal government.
3. Oregon: 9.9%
Oregon imposes an income tax of 9.9% to its residents. The good thing with this state is that there is no tax on sales. The state and local tax authorities both comply with the policy of not taxing sale of products and services. Despite not taxing sales, the tax authorities in Oregon tax cigarettes and alcohol. It has the second-highest liquor tax in the country may be to encourage drug –free lifestyles. When you wish to invest in Oregon, investing in cigarette and alcohol will have a large adverse effect on your profits.
2. Hawaii: 11%
Hawaii could be every honeymoon destination for the romantic couples, but settling there should not cross your mind. The high cost of living in Hawaii is not the only challenge you will face; the income tax rate is high there hitting two digits. The zero tax on sales makes Hawaii most appropriate for business since you will have a wider profit margin as you will pay little taxes. The people with jobs in Hawaii are, however disadvantaged since a more significant percentage of their income is taxed at a maximum rate of 11%.
1. California: 13.3%
It is obvious to see California topping the list as a state with the highest taxation rates. The high taxes might be due to the large number of people living there. The tax board in California behave like con men who will tax everything, and when you complain, they charge you more. According to the Fox and Hounds, the board is not satisfied with the high taxes they impose and are still hungry for more. There is a New California estate tax by Scott Wiener that wants a death tax of 40%, and this might force some of the children to sell the inherited properties to pay the taxes. The trend in taxation in California is forcing many people to move to states with low or no taxes.