A new report has shed light on the staggering discrepancy in lifetime tax burdens between different US states. But which state pays the highest overall?
Lifetime Tax For Americans
Tax day is never a fun time for workers across the United States. But it’s worse for some than for others, as residents in certain states pay far more in taxes over their lifetime than the average American.
Self Financial Report
A new report from personal finance site Self Financial shows that Americans pay more tax over their lifetime than they probably realize, with the average citizen shelling out $524,625 in taxes throughout their life.
Who Pays More?
But who pays the most? Well, the report ranked each state from lowest to highest in terms of who pays the least and who pays the most. And states in the northeast come up very short.
New Jersey On Top
At the top of the list is New Jersey. The average resident of the state pays an astounding $987,117 in lifetime taxes, almost double the average lifetime tax burden of the national average.
North-Eastern States Streak Ahead
Coming in second was the District of Columbia, Washington, D.C., with an average lifetime tax burden of $884,820. Connecticut and Massachusetts, immediately north of New Jersey, came in third and fourth.
Stunning Tax Disparity
It shows a shocking disparity between the tax burden on residents in these northeastern states compared to states that pay an average amount of taxes and states that pay the least lifetime tax overall.
Light Tax Burden in West Virginia
Consider West Virginia, which pays the lowest in lifetime taxes, at an average rate of $358,407 per individual. West Virginians shoulder almost a third of New Jersey’s tax burden.
Tax Migration?
It should come as no surprise that many Americans in high-tax-burdened states are now moving to states with lower federal tax rates. It is a “clear factor” in rising rates of state-to-state migration.
A Clear Factor
According to Carnegie Mellon University finance professor Chester Spratt, chasing a lower tax rate “has clearly factored into the migration” being documented between regions, particularly from north to south.
“Look At the Outflow”
“You look at the outflow from California, for example,” Spratt said, pointing to the continual exodus of high-ranking earners from the Golden State in recent years. “California never used to have outflow.”
National Movers Study
This idea is supported by data from the annual National Movers Study, carried out by US moving and location company United Van Lines.
New Jersey Hit Hardest
The study showed that New Jersey, which has the highest lifetime tax burden and the highest rates of property tax, lost more residents than any other state in 2023.
High Tax States in Top Ten
Of the eight states with the highest rates of resident exodus in 2023, five more were also high-tax states including California, Illinois, Kansas, Massachusetts, and New York.
A Significant Rise
US Census data shows that interstate migration rose by almost 2 million between 2019 and 2022, from 7.4 to 8.2 million.
Moving to Low-Tax States
Many of these domestic migrants moved to states like Arkansas, Florida, Nevada, New Mexico, North Carolina, South Carolina, South Dakota, and Texas, among others. These are all states that offer low tax rates and in some cases no income tax at all.
Spurred on By Covid
The Covid-19 pandemic was a significant driver for this increase in migration. The transition to hybrid and fully remote work meant that millions of people could now move to affordable areas while retaining their jobs.
34.7% of Lifetime Earnings
Further analysis from the Self report showed that on average, taxes eat up 34.7% of lifetime earnings.
A Range of Variables Considered
They extrapolated these numbers from a range of data and variables. Not just individual federal taxes, but also FICA data and taxes on cars, property, food, personal care, and more.
Many Different Sources
It used federal tax data and data from other research sources like the American Community Service, tech real-estate marketplace Zillow, and the federal Consumer Expenditure Survey, among others.
Greener Pastures Across the Country
As tax day looms during a year where inflation, cost of living, and interest rates have caused undue stress to millions, it comes as no surprise that many are looking across state lines for the greener pastures of a reduced lifetime tax burden
The post – Are You Among Those Paying the Highest Lifetime Taxes by State? – first appeared on Wealthy Living.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
