It seems there are elected officials in the states of the union who believe that raising the taxes is the answer for state expenses instead of a set budget to follow and reducing expense when necessary. Wisconsin has just raised its sales tax, increasing the burden upon citizens who are paying $3 per gallon at the pump and trying to make ends meet in their personal budget with rising costs and no income increase to meet those costs. [GazetteXtra, Herald Times] Presently the states with the highest sales tax are California (7.25%), Mississippi (7%), Tennesssee (7%), Rhode Island (7%), Minnesota (6.5%) and Washington at 6.5%. Most states exempt prescription drugs from sales taxes and some also exempt food and clothing purchases, and there are a few who exempt non-prescription drugs as well. Alaska, Delaware, Montana, New Hampshire and Oregon do not collect sales tax. Every state collects excise tax on gasoline, diesel fuel and gasohol, which is in addition to the sales tax for these commodities. Nine states permit cities or counties to impose a local tax on fuel. Sales tax is collected on tobacco products, as well as excise tax – alcoholic beverages are included in this additional taxation. Presently there are 41 states who impose income tax. New Hampshire and Tennessee only tax income from interest and dividends. Seven states do not tax income: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Out of the 41 states who impose income tax, 35 base the taxes upon federal returns, usually taking a portion of what you pay the IRS or using the federal adjusted gross income or taxable income as the starting point to determine what citizens pay. Some states exempt retirement pensions from taxation, to include military retirees because of federal law that imposes limitations upon taxing retirees. Five states allow no exemptions or tax credits for pension and other retirement income that is counted in federal adjusted gross income: California, Connecticut, Nebraska, Rhode Island, and Vermont. Three states do not allow IRA contributions to be deducted from taxable income: New Jersey, Massachusetts and Pennsylvania. The states that do not tax retired military pay are: Alabama, Alaska, Florida, Hawaii, Illinois, Kansas, Kentucky*, Louisiana, Massachusetts, Michigan, Mississippi”, Missouri”, Nevada, New Hampshire, New Jersey, New York, North Carolina*, Oregon*, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin, and Wyoming. (* denotes states that have conditions to the tax policy). Most states give senior citizens a break on their property taxes. Forty states provide either property tax credits or homestead exemptions that limit the value of assessed property subject to tax. All 50 states offer some type of property tax relief program, such as freezes that will lock in the assessed value of your property once you reach a certain age, or deferral taxes until the homeowner moves or dies. Based upon a 2002 census, the following states have the lowest property taxes per capita/year: Arkansas ($191), Alabama ($285), Kentucky ($376), New Mexico ($380), and Oklahoma ($425). The states with the highest local property taxes are: New Jersey ($1,871), Connecticut ($1,733), New York ($1,402), and Rhode Island ($1,369). Ten states still collect an inheritance tax: Indiana, Iowa, Kansas, Kentucky, Maryland, Nebraska, New Jersey, Oregon, Pennsylvania and Tennessee. Connecticut phased out their inheritance tax in 2005. However, in all states, transfers of assets to a spouse are exempt from taxation. In some states, transfers to children and close relatives are also exempt. Despite federal changes in estate taxes, 17 states and the District of Columbia have kept their estate taxes: Illinois, Kansas, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Ohio, Oregon, Rhode Island, Vermont, Virginia and Wisconsin. The most friendly states to retirees are (2005): Hawaii, Wyoming, Delaware, Alabama, Lousiana, Nevada, Alaska, Colorado, Washington, and Arizona. The worst states are (in descending order): Wisconsin, Nebraska, Kansas, Idaho, New York, Maine, Illinois, Minnesota, Missouri, and Texas. The following is a list of the various tax burdens that is imposed by states: Property taxes, Sales and Gross Receipts, Selective Sales Taxes (alcoholic beverages, amusements, insurance premiums, motor fuels, pari-mutuels, public utilities, tobacco products and others); Licenses (alcoholic beverages, amusements, corporation, hunting and fishing, motor vehicles, motor vehicle operators, public utilities, occupation and business); Other Taxes would include individual income, corporation net income, death and gift, documentary and stock transfer, severance pay, et cetera). The top five states with the lowest tax burden according to a percent of income are: Alaska (6.6%), New Hampshire (7.3%), Delaware (8.4%), Tennessee (8.6%), and Alabama at 8.8%. The average among the 50 states is 10.6%. The five states with the highest tax burden are: Maine (13.5%), New York (12.9%), Ohio (12.0%), Minnesota (11.9%), and Hawaii (11.7%). Alaska has the lowest tax burden because of the tax they levy on oil extracted from the state taxes that are included in the price of oil sold, which means they get a cut from consumers across the country. Alaska sends checks to its residents at tax time for this collection.
State Tax Handbook (2006)
[Figures are as of January 2006]