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2014!s Most & Least Fair State Tax Systems

by John S Kiernan
With summer ending, the 2014 elections are starting to heat up. And as usual tax
policy is a hot button issue as candidates for Governor, state legislatures and other
state and local ofces from both parties claim their plan is more fair. But what does
a fair tax system look like? Which states actually have the most fair tax systems?
As a follow up to our 2014 Tax Fairness Survey which focused largely on federal tax
policy, WalletHub has analyzed and ranked the 50 states based on the fairness of
their state and local tax systems including income taxes, sales & excise taxes, and
property taxes. To rank the states, Wallethub conducted a nationally representative
online survey of 1,050 individuals to assess what Americans think a fair state and
local tax system looks like. Our analysts then compared what Americans think is fair to data on the real
structure of tax systems in all 50 states.
We believe this is the rst ever ranking of state and local tax fairness that matches representative data on what
Americans think is fair with real data on the structure of state and local tax systems.
State Rankings
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Ranking
State/Local Tax
Fairness: Overall
Ranking
State/Local Tax
Fairness: Liberal
Ranking
State/Local Tax
Fairness: Conservative
Ranking
1 Montana Montana Montana
2 Oregon South Carolina Delaware
3 South Carolina Oregon South Carolina
4 Delaware Idaho Oregon
5 Idaho Delaware Idaho
239 Share Share
1
State Rankings
2
State and Local Taxes: Whats Fair?
3
Ask the Experts
4
Methodology
1 50
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6 Virginia Minnesota Virginia
7 Minnesota Vermont New Hampshire
8 California Virginia California
9 Maryland Maryland Colorado
10 Vermont Utah North Dakota
11 Utah West Virginia Minnesota
12 New Hampshire Maine Nevada
13 Colorado California Vermont
14 Kansas Kansas Utah
15 North Dakota Colorado West Virginia
16 West Virginia North Dakota Kansas
17 Nevada Missouri Maryland
18 Maine Connecticut Massachusetts
19 Massachusetts New Hampshire Maine
20 New Jersey Nevada New Jersey
21 Missouri Iowa Missouri
22 Connecticut Massachusetts Wyoming
23 Nebraska Wisconsin North Carolina
24 Michigan Nebraska Connecticut
25 Iowa Michigan Michigan
26 North Carolina New Jersey Nebraska
27 Wisconsin North Carolina Iowa
28 Wyoming New York Wisconsin
29 Oklahoma Oklahoma Oklahoma
30 Pennsylvania Pennsylvania Alaska
31 New York Rhode Island South Dakota
32 Alaska New Mexico Pennsylvania
33 Rhode Island Kentucky New Mexico
34 New Mexico Wyoming Kentucky
35 Kentucky Alabama Rhode Island
36 South Dakota Ohio Alabama
37 Alabama South Dakota Tennessee
38 Ohio Louisiana Texas
39 Louisiana Georgia Georgia
40 Georgia Alaska Louisiana
41 Tennessee Arizona Ohio
42 Texas Indiana Mississippi
43 Arizona Mississippi Arizona
44 Mississippi Tennessee Florida
45 Indiana Texas New York
46 Florida Illinois Indiana
47 Illinois Florida Illinois
48 Arkansas Arkansas Arkansas
49 Hawaii Hawaii Hawaii
50 Washington Washington Washington
Ranking Fairness: Overall
Ranking
Fairness: Liberal
Ranking
Fairness: Conservative
Ranking
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State and Local Taxes: Whats Fair?
So what do Americans think is a fair amount to pay in State and Local Taxes? The chart below shows results
from our national survey asking respondents how much they think its fair to ask households at different income
levels to pay in state and local taxes. Answers ranged from a low of 2.5% tax for households making $5,000 a
year to a high of 16.36% tax for households making $2.5 million per year. There is a clear upward trend:
respondents think state and local tax systems are fair when higher income households pay a greater percentage
of their income in taxes than lower income households.

'Fair' State & Local Tax Rate by Household Income

Data averaged from the full sample of respondents shows a strong preference for a progressive state and local
tax structure. And we look at the data by income of respondents we nd the same patternlow-income,
middle-income, and high-income respondents all assert that a progressive tax structure is most fair. But what if
we look by political ideology? Do economic liberals and conservatives feel the same way? The chart below
shows the same data broken down between respondents who self-identify as economically liberal (blue) and
economically conservative (red). Although conservatives appear to support higher taxes on the poor and lower
taxes on the rich, the general trend is the same: all Americans believe a fair state and local tax system taxes
wealthy households at a higher rate than lower- and middle-income households.

'Fair' State & Local Tax Rate by Household Income Views of Economic Liberals & Conservatives
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2014!s Most & Least Fair State Tax Systems | WalletHub http://wallethub.com/edu/most-least-fair-tax-systems/6598/
4 of 8 9/16/14 3:05 PM

So how does the actual structure of state and local tax systems compare to what Americans think is fair? The
chart below presents the average real state and local tax burden by income level across the 50 states, as
estimated by the Institute on Taxation and Economic Policy (ITEP). We see here that the real relationship
between household income and state and local tax burden is negativeas income goes up, state and local tax
burden goes downthe exact opposite of what Americans think is fair.

Average Real State and Local Tax Burden by Income Level
Source: Institute on Taxation and Economic Policy

Overall
Ranking
State
Dependency
on Property
Taxes
(1=least)
Dependency
on Sales &
Excise
Taxes
(1=least)
Dependency
on Income
(Personal &
Corp.) Taxes
(1=least)
Dependency
on Other
Taxes
(1=least)
1 Montana 38 5 23 46
2 Oregon 34 1 46 41
3 South Carolina 29 27 16 32
4 Delaware 49 3 38 49
5 Idaho 16 28 30 29
6 Virginia 31 11 39 26
7 Minnesota 20 24 37 20
8 California 21 16 40 25
9 Maryland 17 8 45 24
10 Vermont 47 14 13 15
11 Utah 13 33 33 22
12
New
Hampshire
50 4 6 30
0%
1.3%
2.6%
3.9%
5.2%
6.5%
7.8%
9.1%
10.4%
11.7%

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2014!s Most & Least Fair State Tax Systems | WalletHub http://wallethub.com/edu/most-least-fair-tax-systems/6598/
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Overall
Ranking
State
on Property
Taxes
(1=least)
on Sales &
Excise
Taxes
(1=least)
on Income
(Personal &
Corp.) Taxes
(1=least)
on Other
Taxes
(1=least)
13 Colorado 36 23 17 18
14 Kansas 25 26 29 6
15 North Dakota 3 17 5 48
16 West Virginia 9 34 32 43
17 Nevada 26 45 N/A 44
18 Maine 40 12 24 13
19 Massachusetts 35 6 43 9
20 New Jersey 48 7 20 11
21 Missouri 18 35 27 19
22 Connecticut 41 9 36 3
23 Nebraska 32 21 18 34
24 Michigan 39 30 10 10
25 Iowa 27 25 22 27
26 North Carolina 11 29 41 16
27 Wisconsin 37 13 31 5
28 Wyoming 42 19 N/A 47
29 Oklahoma 7 37 15 45
30 Pennsylvania 19 18 35 37
31 New York 23 10 44 7
32 Alaska 8 2 4 50
33 Rhode Island 46 15 14 2
34 New Mexico 4 44 8 42
35 Kentucky 10 36 42 23
36 South Dakota 30 47 1 36
37 Alabama 2 42 19 38
38 Ohio 15 22 34 35
39 Louisiana 5 48 9 33
40 Georgia 28 31 25 1
41 Tennessee 12 49 3 39
42 Texas 45 38 N/A 40
43 Arizona 33 39 7 4
44 Mississippi 14 40 12 21
45 Indiana 24 32 26 8
46 Florida 43 41 2 28
47 Illinois 44 20 11 17
48 Arkansas 1 46 28 12
49 Hawaii 6 43 21 14
50 Washington 22 50 N/A 31
Ask the Experts
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2014!s Most & Least Fair State Tax Systems | WalletHub http://wallethub.com/edu/most-least-fair-tax-systems/6598/
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William H. Byrnes
Associate Dean, Thomas
Jefferson School of Law
Mary L. Heen
Professor of Law, School of Law,
University of Richmond
Matthew C. Weinzierl
Associate Professor of Business
Administration, Harvard Business
School
Jan C. Ting
Professor of Law, Beasley School
of Law, Temple University
Richard C. Sansing
Benjamin Ames Kimball Professor
of the Science of Administration,
Tuck School of Business,
Dartmouth College
Nancy E. Shurtz
Bernard Kliks Chair, Oregon Law,
University of Oregon
Don Morris
Professor of Accounting,
University of Illinois Springeld
Reuven Avi-Yonah
Irwin I. Cohn Professor of Law,
University of Michigan Law
School
Methodology
The aim of this study was to determine what Americans think a fair state and local tax system would look like
and use that information to rank the tax systems of the 50 states. To get an accurate picture of what Americans
consider a fair state and local tax system to be, we conducted an original online survey of 1,050 Americans. The
sample was designed to be nationally representative by age and sex and has substantial variation across
income levels, racial and ethnic categories, and political beliefs.
Respondents were asked: In thinking about the fairest possible tax system, what percentage of income do you
think households at each income level should pay in state and local taxes? Respondents were then presented
with 10 different income levels ranging from $5,000 to 2.5 million and asked to enter a number between 0 and
25 corresponding to the percentage of income they think it would be fair for that household to pay in state and
local taxes. We then averaged responses at each income level to determine the master fair tax burden at each
income level for the overall sample and separately for respondents identifying as economically conservative
(n=599) and economically liberal (n=451).
To compare what Americans think is fair to the structure of real state and local tax systems we used data from
the Institute on Taxation and Economic Policy (ITEP). ITEP has estimates of the total state and local tax burden
of households at 7 different points in the income distribution of each of the 50 states (e.g. bottom 20%, top 1%,
etc.). Since every state has a unique income distribution, the corresponding household income at each point in
the distribution varies by state (e.g. top 1% earns more in Connecticut than in Mississippi). Using linear
interpolation, we generated estimates of what Americans consider a fair tax burden to be at each of these
unique income levels. This allows us to compare the real state and local tax burden of households including
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John S Kiernan
John Kiernan is Senior Writer & Editor at Evolution Finance. He
graduated from the University of Maryland with a BA in
Journalism, a minor in Sport Commerce & Culture,
1201 Wallet Points
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Abs(Survey Estimate of Fair Tax Burden Real Tax Burden) = abs(Difference)
We then took the mean of the absolute value of the difference between the fair tax burden and the real tax
burden for the 5 income quintiles for each of the 50 states. States were then ranked, with higher ranking
corresponding to lower mean difference between fair tax burden and real tax burden. This procedure was
repeated using the fair tax assessments of economically liberal and economically conservative respondents.

Source: Institute on Taxation and Economic Policy; U.S. Census Bureau, WalletHub Survey Data.
Author
2014s Most and Least Educated Cities
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