Brace yourself for Tax Day: New Yorkers face the highest tax burden in the country
Tax Day is looming, and with it comes some unpleasant news for New Yorkers: According to a new study from WalletHub, New York wins the booby prize of being the state with the highest overall tax burden in the entire country, with an average total tax rate of 12.94 percent. See the interactive map below to see how other states compare:
WalletHub determined its rankings by looking at property taxes, individual income taxes, and sales and excise taxes. And while we don't "win" in every category—New York comes in 21st for its sales tax rate, with Hawaii taking first place in that category—New Yorkers do pay the highest income tax rate in the U.S. at an average of 4.76 percent. Our property tax burden is up there, too: New York comes in seventh in this metric, paying an average rate of 4.55 percent.
We previously covered property taxes in the state and found that New York's high rate in this department is skewed by the suburbs: Nassau and Westchester Counties both have especially high property taxes, while city dwellers pay a lower rate, thanks to the city's complicated method of assessing home values.
But what's the reason for that sky-high income tax rate? One explanation may be the high concentration of wealth here. New York State taxes its residents progressively, explains SmartAsset, with the highest earners—those taking home salaries over $1.06 million—taxed at a rate of 8.82 percent.
Per Forbes, New York has the second highest amount of billionaire residents in the nation, and Fortune writes that the New York metro area has the greatest number—963,100—of high net worth individuals—that is, those with at least $1 million in investable assets. This substantial population of the very wealthy, paying taxes in the highest bracket, likely drags up the overall average tax burden.
There's that additional tax that is the bane of NYC residents: the local city tax on their income. This is an extra expense that only a few other American cities place upon their residents; here, those earning $500,000 or more annually will pay a rate of 3.876 percent. According to the city's Independent Budget Office, 12 percent of city revenue comes from income taxes, which then help to support public services like sanitation, education, the NYPD and NYFD, cultural institutions, and more.
Some top earners, though, do whatever they can to avoid paying this. The Wall Street Journal reports on the lengths some go to avoid spending more than 183 days in NYC, the cut-off point for being considered a permanent resident and thus responsible for paying the city tax.
Others opt instead to leave the state entirely, which is why Governor Cuomo has lowered income taxes at all brackets, PolitiFact writes. But, per the fact-checking website, property taxes have risen during the same time period, keeping New York in that unfortunate number one spot when it comes to tax burden.
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