Before people decide where they want to live, some consider the taxes they may, or may not, have to pay. In 2021, the average American paid just under 10 percent in income taxes, according to The Tax Foundation.
This nationwide tax rate was relatively unchanged from a year earlier, even though the average households income dropped by more than $1,000. However, some states painted a very different story.
Tax season is quickly approaching, and Americans are encouraged to hang on to their tax returns for a rainy day. Putting this money into emergency funds, rather than engaging in frivolous spending, could help you handle any unexpected bills you can’t otherwise afford.
The Empire State has some of the highest tax rates in the country. Last tax season, the average resident paid 12.8 percent in income taxes. This resulted in $136 billion in local and state tax revenue. But the buck doesn’t stop there.
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New York also has the highest tax on cigarettes in the country at $4.35. In addition, the state is home to the country with the highest property tax rate in the country.
Meanwhile, the Garden State currently has the second-highest personal income tax at 12.4 percent. Last year, this netted New Jersey approximately $51 billion in tax revenue. In addition, the state also has notably high sales and excise taxes, which can make it more expensive to purchase everyday products and services.
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While the East Coast is home to some of the most expensive tax rates in the country, Alaska is currently the most affordable. Last tax season, the average resident paid just 7 percent in personal income taxes, netting the state just $6 billion in revenue, which was once of the lowest in the country.
With a personal income tax of just 7.6 percent, South Dakota has the second-lowest tax rate in the country. In 2021, this netted the state just $2.58 billion in tax revenue, which was the lowest in the country. However, the state has a population of 824,082, so the amount of collectable taxes is all relative.
Americans on the verge of retirement or who just want to start fresh may want to consider a move to a state with more affordable taxes. This may let them stretch their dollar even further and allow for an earlier retirement.