Which States Take the Most From the Wealthy?

Which States Take the Most From the Wealthy?

No one likes paying taxes. That being said, most people recognize the need for taxes. But they still do everything they can to keep their tax bill as low as possible. Minimizing taxes is especially important for the wealthy because they pay the majority of the country’s taxes. For example, according to the IRS, in 2016, there were 25.3 million taxpayers that reported an adjusted gross income of more than $100,000. Although these 25+ million taxpayers only made up less than 17 percent of all filers, they still paid more than 80 percent of all federal income taxes for the 2015 tax year.

State and Local Taxes Really Add Up

No one can escape federal income taxes, but the taxation doesn’t stop there. That’s because taxpayers have to deal with state and local taxes, as well. Depending on the state you live in, these taxes can include income, property, and sales taxes, and in some cases more. These additional taxes can really add up, especially for the wealthy. Every state is a little different. And some states aren’t nearly as bad as others. There are a few states, however, that really seem to stick it to the wealthy, when it comes to taxes.

These six states appear to be at the top of the list.

New York
Start with the fourth highest average property tax bill in the U.S. of $4,738 and it doesn’t take long to see why New York made the list. On the plus side, you can earn as much as $1,077,549 ($2,155,349 jointly) and only pay a state income tax rate of 6.85 percent. However, if you go over those amounts then your rate will jump to 8.82 percent.

New Jersey
The Garden State is notorious for high property taxes. In fact, at 2.4 percent it’s the highest rate in the country. That puts the average yearly property tax bill at $7,601. That’s 3.5 times higher than the national average. Jersey also charges an 8.97 percent state income tax to add insult to injury.

Vermont
Vermont also goes after the wealthy with high tax rates. Officials tax Social Security and just like the federal government they don’t allow any exemptions with the state SS tax. The state also taxes retirement income at ordinary income tax rates, making residents’ IRAs, 401(k)s and pensions subject to heavy taxation. Vermont also has the eight highest property tax rate. And last, but not least, the state income tax rate is between 7.8 percent and 8.95 percent.

Minnesota
Like Vermont, Minnesota also taxes Social Security benefits. For those making more than $156,911 (or $261,510 for married couples filing jointly), the state income tax rate is 9.85 percent. At 7.42 percent, Minnesota also has the 17th highest state and local sales tax rate in the nation.

Oregon
On the plus side, there is no state or local sales tax in Oregon. On the downside, the state really sticks it to the wealthy via its state income tax. Even those who make as little as $8,450 a year must pay a 9 percent state income tax rate. Those who make more than $125,000 ($250,000 jointly) pay a 9.9 percent rate. Property taxes are also very high in Oregon, more than $400 more than the national average.

California
The Golden State is great for sun but not for taxes. The worst offender is California’s state income tax, which for the wealthy (those making more than $268,750) is a whopping 10.3 percent. If you’re single and make $1 million or more then you’ll have to fork over 13.3 percent of your income. The state also tacks on a high sales tax rate, coming in as the ninth highest in the country.

We hope you found this article about “Which States Take the Most From the Wealthy?” helpful.  If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page  or our website at www.GROCO.com.  Unfortunately, we no longer give advice to other tax professionals gratis.

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Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com.  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.

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