For the second year in a row, WalletHub has pegged Illinois as the worst state to be a taxpayer.
The personal finance site’s study ranks all 50 states and the District of Columbia based on the effective total state and local tax rate, which is calculated as a percentage of the national median household income of $53,889. Four types of taxation are taken into account: property tax, vehicle property tax, income tax, and sales and excise tax.
With an effective total state and local tax rate of 14.54 percent, Illinois has the highest in the nation. But when adjusted for cost of living, Illinois’ rank went from dead last to No. 43, according to WalletHub.
Illinois was the only state to have a combined tax rate greater than 14 percent, and was trailed by Nebraska at 13.85 percent; Wisconsin at 13.58 percent; Connecticut at 13.48 percent; and Rhode Island at 13.46 percent.
The five states with the lowest tax rates are Alaska (5.69 percent), Delaware (6.02 percent), Montana (6.92 percent), Wyoming (7.45 percent) and Nevada (7.72 percent).
Findings for Illinois
- Overall rank: 51
- Effective total state and local tax rates: 14.54%
- Annual state and local taxes on median U.S. household: $7,836
- Percent difference between state and national average: 35.83%
- Annual state and local taxes on median state household: $8,100
- Adjusted overall rank: 43
As for the four types of taxation WalletHub used to calculate the effective total state and local tax rate, Illinois ranked 50th for property taxes, 30th for income taxes and 27th for sales and excise taxes. (There’s no vehicle property tax in Illinois.)
The interactive chart below shows how Illinois compares to its neighboring states.
From WalletHub on its methodology:
In order to identify the states with the highest and lowest tax rates, WalletHub’s analysts compared the 50 states and the District of Columbia across four types of taxation:
- Real-Estate Tax: To calculate this tax, we first divided the “Median Real-Estate Tax Amount Paid” by the “Median Home Price” in each state. We then applied the resulting rates to a house worth $175,700, the median value for a home in the U.S., in order to obtain the dollar amount paid as real-estate tax.
- Vehicle Property Tax: To calculate this tax, we examined data for cities and counties collectively accounting for at least 50 percent of the state’s population and extrapolated this to the state level using weighted averages based on population size. For each state, we assumed all residents own the same car: the 2016 Toyota Camry LE four-door sedan, 2015’s highest-selling car, valued at $23,070.
- Income Tax: To calculate this tax, we used the percentage of income (middle income rate) spent on income tax from WalletHub’s Best States to Be Rich or Poor from a Tax Perspective report. More specifically, we used the mean third quintile income amount of $53,889.
- Sales & Excise Tax: To calculate this tax, we used the percentage of income (middle income rate) spent on sales and excise taxes from WalletHub’s Best States to Be Rich or Poor from a Tax Perspective report. More specifically, we used the mean third quintile income amount of $53,889.
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