Americans Are Watching Their Paychecks Shrink: These States Take the Biggest Share of Residents’ Income in Taxes
For millions of Americans, the biggest financial concern is no longer only about earning more money. It is about how much money remains after taxes, housing costs, insurance, and everyday expenses take their share. A new national tax burden analysis shows a widening gap between states, with residents in the highest-tax states paying more than 13% of their personal income toward state and local governments, while residents in the lowest-tax states pay less than 5%.
The difference between those numbers is not just a statistic. For a household earning $100,000 per year, the gap can represent thousands of dollars that could otherwise go toward retirement accounts, mortgage payments, emergency savings, or investments. Over 10 years, even a small annual difference can add up to tens of thousands of dollars.
As Americans continue to debate affordability, relocation, and financial security, state tax burdens have become a major factor in deciding where to live, work, and retire.
Hawaii Ranks No. 1 With America’s Highest Tax Burden
Hawaii ranks at the top, with residents paying approximately 13.3% of their personal income in state and local taxes. That means someone earning $100,000 annually experiences an average tax burden of about $13,300.
The biggest driver behind Hawaii’s ranking is not traditional income taxes or property taxes. Instead, the state’s largest burden comes from sales and excise taxes, which represent roughly 7.5% of personal income.
That means Hawaii residents often feel the impact through daily purchases. Groceries, restaurants, fuel, services, and other household expenses all contribute to the overall tax pressure throughout the year.
Hawaii’s geography also plays a role. Because the state depends heavily on imported goods transported across thousands of miles, residents already face higher costs before taxes are added. The combination of expensive goods and a high consumption tax burden creates a unique financial challenge for households.
New York Ranks Second as Multiple Taxes Add Pressure
New York ranks second nationally, with residents paying about 12.4% of their personal income in state and local taxes. For a household earning $100,000, that represents roughly $12,400.
The reason New York ranks so highly is that residents face pressure from multiple tax categories simultaneously. Individual income taxes account for around 4.7% of personal income, property taxes contribute approximately 4.2%, and sales and excise taxes add another 3.5%.
The impact varies depending on where residents live and how they earn their money. High-income professionals may feel the effect through income taxes, homeowners may struggle with property taxes, and families may notice higher costs through everyday purchases.
New York’s ranking has continued to fuel conversations about affordability, as residents must weigh higher taxes against wages, job opportunities, infrastructure, and public services.
Vermont’s Property Taxes Push It Into Third Place
Vermont ranks third, with residents paying around 11.1% of personal income in combined state and local taxes.
The biggest reason Vermont ranks so high is property taxes. The state has one of the highest property tax burdens in America, with property taxes representing nearly 4.9% of residents’ income.
For homeowners, this can create a long-term financial burden that continues even after a mortgage has been paid off. A household paying several thousand dollars every year in property taxes has less money available for investments, retirement savings, and other financial goals.
The impact also affects renters because landlords often factor property taxes into rental prices. Higher property costs can eventually affect the broader housing market.
New Mexico and Maine Complete the Top Five
New Mexico ranks fourth nationally, with residents paying approximately 10.8% of their income in state and local taxes.
Unlike Vermont and New York, New Mexico’s tax pressure is more closely connected to sales and excise taxes. These taxes account for more than 6% of personal income, meaning residents often feel the impact through everyday spending.
Maine ranks fifth, with a total tax burden of about 10%. The state’s tax system is more balanced, with pressure coming from property, income, and sales taxes rather than from a single dominant category.
Maine’s property tax burden is close to 4% of income, while income taxes account for roughly 2.7% and sales and excise taxes contribute about 3.4%.
Together, these states show that high tax burdens can happen in different ways. Some states collect more from income, others from property ownership, and others from consumer spending.
The Highest-Tax States Are Not Expensive for the Same Reason
The national tax map reveals that every state has its own financial fingerprint.
Hawaii’s burden is mainly driven by sales and excise taxes. New York combines income, property, and sales taxes. Vermont’s ranking is heavily influenced by property taxes. New Mexico depends more on consumption-based taxes, while Maine spreads the burden across several categories.
This difference matters because the same tax system can affect people differently. A homeowner, renter, retiree, small-business owner, and high-income worker may each experience the financial impact differently.
The headline number tells only part of the story. The type of tax creating the burden often matters just as much as the total percentage.
Alaska Has America’s Lowest Tax Burden
At the opposite end of the ranking, Alaska has the lowest tax burden in the country at approximately 4.9%.
For someone earning $100,000, that represents an average state and local tax impact of about $4,900 — roughly $8,400 less than the average burden in Hawaii on the same income level.
One major reason Alaska ranks so low is that it does not impose a traditional individual state income tax.
Several other states also avoid individual income taxes, including Florida, Texas, Tennessee, Nevada, South Dakota, and Wyoming.
However, a low income tax does not automatically mean every expense is lower. States still need revenue, meaning they may rely more heavily on property taxes, sales taxes, fees, or other sources.
The true financial advantage depends on the overall cost-of-living picture.
Oregon Has the Highest Income Tax Burden
When looking only at income taxes, Oregon stands out as the state with the highest individual income tax burden.
Residents pay approximately 4.8% of personal income through individual income taxes. For a person earning $100,000, that represents about $4,800 annually.
Income taxes are especially important because they directly affect take-home pay. Workers see the impact every paycheck through withholding before money reaches their bank accounts.
This has made income tax policies a major consideration for remote workers, entrepreneurs, retirees, and businesses deciding where to relocate.
Vermont Leads Property Taxes While Alabama Ranks Among the Lowest
Property taxes remain one of the largest differences between states.
Vermont has the highest property tax burden, approaching 4.9% of personal income, while Alabama remains among the lowest at roughly 1.4%.
The difference may appear small, but over decades of homeownership, the financial impact can become significant.
A homeowner paying thousands of dollars more each year in property taxes may have less flexibility for retirement planning, home improvements, or building wealth.
That is why property taxes are often among the first factors retirees and families consider when choosing a new state.
Hawaii Has the Highest Sales and Excise Tax Burden
Sales and excise taxes create another major divide across the country.
Hawaii has the highest burden in this category, with residents paying approximately 7.5% of personal income through sales and excise taxes.
Unlike income taxes, which appear clearly on paychecks, sales taxes are spread across hundreds of purchases throughout the year. A small percentage added to daily spending can become a major annual expense.
New Hampshire sits at the opposite end because it does not have a broad general sales tax and maintains relatively low excise tax collections.
The difference between the two states shows how dramatically tax structures can vary across America.
Why Americans Are Looking Beyond Salary Numbers
Tax burden has become increasingly important as Americans rethink where they can afford to live.
A salary of $100,000 in one state does not always provide the same standard of living as $100,000 in another state. The final financial picture depends on taxes, housing, insurance, transportation costs, and wages.
Before moving, many households are now comparing more than just job opportunities. They are looking at how much money remains after all expenses are paid.
A state with higher taxes may still make financial sense if wages are stronger and services are better. A low-tax state may not provide the same advantage if housing or insurance costs are significantly higher.
The Tax Difference Can Add Up to Thousands Over Time
The gap between high-tax and low-tax states can create a significant financial difference over time. An 8 percentage-point difference in tax burden could represent roughly $8,000 more each year for a household earning $100,000, about $16,000 annually for a household earning $200,000, and potentially more than $80,000 over a decade.
For many families, that amount of money can directly influence their financial future by creating more room for retirement contributions, faster debt repayment, stronger emergency savings, and larger investments. Over the years, the difference between keeping more of a paycheck and sending more of it toward taxes can shape how quickly households build wealth and achieve long-term financial goals.
The Real Question Is Not Just Paying Less, It Is Keeping More
The latest tax burden rankings reveal a broader financial reality across America.
States with the highest tax burdens are not all expensive for the same reasons. Hawaii relies heavily on consumption taxes, New York combines several major taxes, and Vermont faces pressure from property taxes.
Meanwhile, states with lower tax burdens may offer advantages through lower income taxes but still require residents to evaluate other costs.
For Americans choosing where to live, the most important question may not be which state collects the least money.
