How to Compare City & State Taxes

It pays to review the tax burden information from various state and cities prior to moving.

Comparing city and state taxes allows policymakers and citizens to assess the overall tax burden throughout the United States. The most common taxes levied and collected by states and cities are sales taxes, property taxes and income taxes. Different states and cities charge different tax rates, making it possible to compare the relative tax burden borne by taxpayers. Anyone planning to relocate to a new state or city can benefit from researching the tax burden of their current place of residence and comparing it to the state or city where they plan to relocate.

Things You'll Need

• State and city tax data
• U.S. census personal income data

Instructions

1. Calculate the tax burden ratio for each state you want to analyze. The tax burden ratio is the average amount of state taxes that the average household pays in a given tax year divided by the state's average household income. For instance in 2005 the Tax Foundation, a policy research group, calculated the tax burden ratio for New Jersey to be 10.40 percent.

2. Calculate the tax burden ratio for each city you want to analyze. The tax burden ratio for a city is the average amount of taxes paid by the average city household in a given tax year divided by the city's average household income. For instance, in 2005, the Tax Foundation calculated the tax burden ratio for Bridgeport, Connecticut, to be 17.70 percent.

3. Compare the tax burden ratio for each city and state you want to analyze. For instance, the 2005 tax burden ratio for New Jersey was 10.40 percent, which is a smaller tax burden ratio than the 12.00-percent tax burden ratio for the State of New York. The higher the tax burden ratio, the greater the tax burden.

References

• How tax-friendly is your state?
• Big city taxes

Resources

• Tax foundation