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Two Midwest states ranked at top nationally for tax burdens

(The Center Square) – Iowans and Minnesotans face among the top 10 highest tax burdens in the nation, according to a report WalletHub released Tuesday.

WalletHub assessed the “tax burden,” or the proportion of total personal income residents pay toward state and local taxes. The report compared the states’ sales and excise taxes, property taxes and individual income taxes as a share of the states’ total personal income. The report pulled data from the Tax Policy Center.

Minnesota ranked eighth (9.41% overall tax burden), and Iowa ranked 10th (9.15% overall tax burden). Minnesota has the sixth-highest individual income tax burden (3.11%). Iowa has the 14th highest property tax burden (3.49%) and the 16th highest individual income tax burden (2.41%).

Wisconsinites (8.62% overall tax burden) and Michiganders (7.40% overall tax burden) fared better than those states, compared with their peers. They have the 17th and 38th highest tax burdens, the report found.

While Wisconsin has the 13th highest individual income tax burden (2.63%) and the 16th highest individual property tax burden (3.12%), it has the 37th highest total sales and excise tax burden (2.87%). Michigan’s highest burden compared with other states is its property taxes, which rank 20th, at 3.02%.

New York, Hawaii and Maine have the top three highest overall tax burdens. New York has the highest individual income tax burden (4.72%) and Hawaii has the highest total sales and excise tax burden (6.71%). Maine has the highest property tax burden (5.33%).

Alaska, Delaware and New Hampshire fall at the bottom of the pack. Their overall tax burdens are 3.59%, 6.12% and 6.14%, respectively. While New Hampshire has the third highest property tax burden (4.94%), it has the 42nd highest individual income tax burden (0.13%) and the lowest sales and excise tax burden (1.07%).

Texas Christian University accounting professor Patrick Hopkins said in the report that since inflation directly affects prices, if governments make no changes to spending, residents can expect expenditures to increase during times of inflation. Governments have to either spend less or increase revenue to keep a balanced budget.

University of New Haven accounting and taxation professor James Mohs said the rate of the relocations of individuals’ and businesses’ relocations appears to directly correlate with tax rates and the impact of costly infrastructures.

“The infrastructure costs may often be indirect taxes and fees,” he said. “When capital leaves states and services are not clawed back, increases in taxes and fees will have a downward impact on economic growth.”

Tax revenues are a function of income or wealth, he said.

“To the extent that prices and taxpayers’ salaries increase, tax receipts from income and sales taxes will increase,” he said. “To the extent that costs increase, property tax revenues will also increase. Property taxes are a function of the locality’s fiscal budgets, cost increases to the jurisdiction above those anticipated in their budget, during a fiscal year may not be reflected until the next tax year’s budget. This would give rise to a timing difference between property list dates. That in turn would require recovering past tax revenues in the next or current fiscal year.”

The report found that red states, overall, have a lower tax burden compared with blue states.

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