Once a year, with Tax Day looming large and sweeping tax reform passed in recent months, WalletHub releases a ranking of tax rates by state, and this year, Illinois has the distinction of being rated last — No. 51 of 51 — in the category of “Overall Effective State & Local Tax Rate.”
You can find highlights from both below, followed by the full list of WalletHub’s 2019 taxpayer resources.
Tax Rates in Illinois (1 = Lowest; 25 = Avg.
- 51st — Overall Effective State & Local Tax Rate
- 39th — Income Tax
- 50th — Real-Estate Tax
- 1st — Vehicle Property Tax
- 25th — Sales & Excise Taxes
WalletHub’s 2019 Taxpayer Resources
- What To Do If You Can’t Pay
- Pros & Cons Of Paying With Credit
- Tax Scams & Tips for Avoiding Them
- Last-Minute Tax Tips
- Property Taxes by State
How And Why WalletHub Compares Overall Taxes
Tax season can be stressful for the millions of Americans who owe money to Uncle Sam. Every year, the average U.S. household pays more than $7,800 in federal income taxes, according to the Bureau of Labor Statistics.
While all are faced with that same obligation, there is significant difference when it comes to state and local taxes. Taxpayers in the most tax-expensive states, for instance, pay three times more than those in the cheapest states.
Surprisingly, though, low income taxes don’t always mean low taxes as a whole.
For example, while the state of Washington’s citizens don’t pay income tax, they still end up spending over 8 percent of their annual income on sales and excise taxes.
Texas residents also don’t pay income tax, but spend 1.83 percent of their income on real estate taxes, one of the highest rates in the country.
Compare these to California, where residents owe almost 5 percent of their income in sales and excise taxes, and just 0.77 percent in real estate tax.
WalletHub searched for answers by comparing state and local tax rates in the 50 states and the District of Columbia against national medians. To illustrate, its experts calculated relative income-tax obligations by applying the effective income-tax rates in each state and locality to the average American’s income.
Scroll down for rankings and a full description of methodology.
In order to identify the states with the highest and lowest tax rates, WalletHub compared the 50 states and the District of Columbia across four types of taxation:
- Real-Estate Tax: We first divided the “Median Real-Estate Tax Amount Paid” by the “Median Home Price” in each state. We then applied the resulting rates to a house worth $193,500, the median value for a home in the U.S., in order to obtain the dollar amount paid as real-estate tax per household.
- Vehicle Property Tax: We examined data for cities and counties collectively accounting for at least 50 percent of the state’s population and extrapolated this to the state level using weighted averages based on population size. For each state, we assumed all residents own the same car: a Toyota Camry LE four-door sedan, 2018’s highest-selling car, valued at $24,350, as of March 2019.
- Income Tax: We used the percentage of income (middle income rate) spent on income tax from WalletHub’s Best States to Be Rich or Poor from a Tax Perspective report. “Income” refers to the mean third quintile U.S. income amount of $58,082.
- Sales & Excise Tax: We used the percentage of income (middle income rate) spent on sales and excise taxes from WalletHub’s Best States to Be Rich or Poor from a Tax Perspective report. “Income” refers to the mean third quintile U.S. income amount of $58,082.
Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Tax Foundation, Federation of Tax Administrators, American Petroleum Institute, National Automobile Dealers Association, each state’s Department of Motor Vehicles and WalletHub research.