Mapped: Visualizing Unequal State Tax Burdens Across America
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Visualizing Unequal State Tax Burdens Across America

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Unequal U.S. State Tax Burdens

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Visualizing Unequal State Tax Burdens Across America

What percentage of your income goes into Uncle Sam’s pocket?

Your answer will vary depending on how much you earn. Data shows that low and middle-income families pay a much greater share of their income towards state and local taxes than wealthy families.

Today’s visualization uses data from the Institute on Taxation and Economic Policy (ITEP) to map the effective tax rates—or taxes paid as a share of family income—across income groups at the state and local level.

Crunching the Numbers

The data reflects the effect of tax changes enacted through September 10, 2018, using 2015 income levels (the latest year for available, detailed income data). Both single and married tax filers are included, while elderly taxpayers, dependent filers, and those with negative incomes are excluded.

Taxes Included
The report includes the state and local taxes for all 50 states and the District of Columbia. Taxes are broken into 3 broad groups:

  • Consumption taxes – general sales taxes and specialized excise taxes
  • Property taxes – including taxes on homes, businesses, and motor vehicles
  • Income taxes – paid by individuals and businesses

Federal taxes are not considered.

Editor’s note: It’s worth noting that federal personal income tax has progressive rates, with the lowest earning bracket at 10% and the highest earning bracket at 37% in 2019. At a national level, property taxes are not charged and there is a very low reliance on excise taxes—both of which tend to be regressive as outlined below.

Income Included
The report includes both taxable and tax-exempt income such as worker’s compensation benefits. It also includes estimates for the amount of unreported income.

Which States Have the Most Unequal Tax Burdens?

Across the U.S., there is a wide disparity in how taxes affect different income groups. Here’s how it all breaks down, ranked in order of tax system inequality*:

Total State and Local Taxes As a Share of Income
By State and Income Group

RANKSTATELOWEST 20%MIDDLE 60%TOP 1%
1Washington17.8%10.4%3.0%
2Texas13.0%9.4%3.1%
3Florida12.7%7.7%2.3%
4South Dakota11.2%8.4%2.5%
5Nevada10.2%7.1%1.9%
6Tennessee10.5%8.1%2.8%
7Pennsylvania13.8%10.8%6.0%
8Illinois14.4%12.2%7.4%
9Oklahoma13.2%10.3%6.2%
10Wyoming9.6%6.9%2.6%
11Arizona13.0%9.3%5.9%
12Indiana12.8%10.4%6.8%
13Ohio12.3%10.6%6.5%
14Louisiana11.9%9.8%6.2%
15Hawaii15.0%11.5%8.9%
16New Hampshire9.1%7.1%3.0%
17North Dakota10.3%7.7%4.5%
18Alabama9.9%8.6%5.0%
19New Mexico10.6%10.0%6.0%
20Arkansas11.3%10.4%6.9%
21Iowa12.4%10.5%7.7%
22Michigan10.4%9.2%6.2%
23Kansas11.4%10.4%7.4%
24Mississippi10.2%9.8%6.7%
25Kentucky9.5%10.5%6.7%
26Alaska7.0%4.3%2.5%
27Georgia10.7%9.5%7.0%
28Missouri9.9%9.1%6.2%
29Connecticut11.5%11.6%8.1%
30Massachusetts10.0%9.3%6.5%
31North Carolina9.5%9.1%6.4%
32Rhode Island12.1%9.3%7.9%
33Virginia9.8%9.3%7.0%
34Wisconsin10.1%10.4%7.7%
35Colorado8.7%8.6%6.5%
36Nebraska11.1%10.2%8.7%
37West Virginia9.4%8.8%7.4%
38Idaho9.2%8.4%7.2%
39South Carolina8.3%8.3%6.8%
40Utah7.5%8.4%6.7%
41Oregon10.1%8.8%8.1%
42Maryland9.8%10.6%9.0%
43Montana7.9%6.7%6.5%
44New York11.4%12.5%11.3%
45Maine8.7%9.3%8.6%
46New Jersey8.7%10.2%9.8%
47Minnesota8.7%9.8%10.1%
48Delaware5.5%5.8%6.5%
49Vermont8.7%9.4%10.4%
50District of Columbia6.3%9.8%9.5%
51California10.5%8.9%12.4%

* The ITEP Tax Inequality Index measures the effects of each state’s tax structure on income inequality. In states that rank high for inequality, incomes are less equal after state and local taxes are applied than before. On the flip side, states with the most equality are those where incomes are at least somewhat more equal after state and local taxes are levied than before.

Washington has the most unequal tax burdens. Proportional to their income, Washington taxpayers in the bottom 20% pay almost 6x more than those in the top 1%.

At the other end of the scale, California has the most equal tax system. As a share of their income, the state’s poorest families pay only 0.84x what the wealthiest families pay.

Overall, however, the vast majority of tax systems are regressive.

effective us state and local tax rates

On average, the lowest 20% of income earners pay 1.54x more of their income in taxes compared to the top 1%.

The Main Causes

Two main factors drive a tax system’s (lack of) equality: how the state designs each tax, and the state’s reliance on different tax sources.

To better explain how this works, let’s take a closer look at each type of tax.

Sales & Excise Taxes

These taxes apply only to spent income, and exempt saved income. Since families with a higher household income are able to save a much larger percentage of their income, and the poorest families can barely save at all, the tax is regressive by nature.

The particular types of items that are taxed affect fairness as well. Quite a few states include food in their sales tax base, and low-income families spend the majority of their income on groceries and other necessities.

Not only that, excise taxes are levied on a small subset of goods that typically have a practical per-person maximum. For example, one person can only use so much fuel. As a wealthy family’s income increases, they generally do not continue to increase their spending on these goods.

States rely on these taxes more than any other tax source, which only exacerbates the problem.

Property Taxes

For the average household, the home makes up the majority of their total wealth—meaning most of their wealth is taxed. However, the wealth composition of richer families skews much more heavily towards stock portfolios, business equity, and other assets, which are exempt from property taxes.

While these types of assets are subject to taxes like capital gains and dividends, the distinction is that these taxes are levied only on earned gains. In contrast, property taxes are owed simply as a result of owning the asset.

What about those who don’t own homes? Landlords generally pass on the cost of property tax to renters in the form of higher rent. Since rent comprises a much higher share of expenses for poorer families, this makes property tax even more inequitable.

Income Taxes

State income taxes are typically progressive. This means effective tax rates go up as income goes up. Here’s how the U.S. averages break down:

  • Low-income families: 0.04%
  • Middle-income families: 2.1%
  • Top 1%: 4.6%

However, certain policy choices can turn this on its head. Some states have a flat rate for all income levels, a lack of deductions and credits for low-income taxpayers, or tax loopholes that can be beneficial for wealthier income groups.

Nine states charge no income tax at all, garnering reputations as “low tax” states—but this is true only for high-income families. In order to make up for the lost revenue, states rely more heavily on tax sources that disproportionately affect the lowest earners.

equality and personal income tax

Evidently, states with personal income taxes have more equitable effective tax burdens.

Tackling Systemic Issues

Regressive state tax systems negatively impact the after-tax income of low and middle-income families. This means they have less to spend on daily expenses, or to save for the future.

Not only that, because wealthier families aren’t contributing a proportional share of tax dollars, state revenues grow more slowly.

For states looking to create a more equitable tax system, states with progressive systems offer some guidance:

  • Graduated income tax rates
  • Additional tax over a high-income threshold (e.g $1 million)
  • Limits on tax breaks for upper-income taxpayers
  • Targeted low-income tax credits
  • Lower reliance on regressive consumption taxes

By implementing such policies, governments may see more tax equality—and more tax dollars for programs and services.

Hat tip to reddit user prikhodkop, whose visualization introduced us to this data.

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Interest Rate Hikes vs. Inflation Rate, by Country

Inflation rates are reaching multi-decade highs in some countries. How aggressive have central banks been with interest rate hikes?

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Interest Rate Hikes vs. Inflation Rate, by Country

Imagine today’s high inflation like a car speeding down a hill. In order to slow it down, you need to hit the brakes. In this case, the “brakes” are interest rate hikes intended to slow spending. However, some central banks are hitting the brakes faster than others.

This graphic uses data from central banks and government websites to show how policy interest rates and inflation rates have changed since the start of the year. It was inspired by a chart created by Macrobond.

How Do Interest Rate Hikes Combat Inflation?

To understand how interest rates influence inflation, we need to understand how inflation works. Inflation is the result of too much money chasing too few goods. Over the last several months, this has occurred amid a surge in demand and supply chain disruptions worsened by Russia’s invasion of Ukraine.

In an effort to combat inflation, central banks will raise their policy rate. This is the rate they charge commercial banks for loans or pay commercial banks for deposits. Commercial banks pass on a portion of these higher rates to their customers, which reduces the purchasing power of businesses and consumers. For example, it becomes more expensive to borrow money for a house or car.

Ultimately, interest rate hikes act to slow spending and encourage saving. This motivates companies to increase prices at a slower rate, or lower prices, to stimulate demand.

Rising Interest Rates and Inflation

With inflation rates hitting multi-decade highs in some countries, many central banks have announced interest rate hikes. Below, we show how the inflation rate and policy interest rate have changed for select countries and regions since January 2022. The jurisdictions are ordered from highest to lowest current inflation rate.

JurisdictionJan 2022 InflationMay 2022 InflationJan 2022 Policy RateJun 2022 Policy Rate
UK5.50%9.10%0.25%1.25%
U.S.7.50%8.60%0.00%-0.25%1.50%-1.75%
Euro Area5.10%8.10%0.00%0.00%
Canada5.10%7.70%0.25%1.50%
Sweden3.90%7.20%0.00%0.25%
New Zealand5.90%6.90%0.75%2.00%
Norway3.20%5.70%0.50%1.25%
Australia3.50%5.10%0.10%0.85%
Switzerland1.60%2.90%-0.75%-0.25%
Japan0.50%2.50%-0.10%-0.10%

The Euro area has 3 policy rates; the data above represents the main refinancing operations rate. Inflation data is as of May 2022 except for New Zealand and Australia, where the latest quarterly data is as of March 2022.

The U.S. Federal Reserve has been the most aggressive with its interest rate hikes. It has raised its policy rate by 1.5% since January, with half of that increase occurring at the June 2022 meeting. Jerome Powell, the Federal Reserve chair, said the committee would like to “do a little more front-end loading” to bring policy rates to normal levels. The action comes as the U.S. faces its highest inflation rate in 40 years.

On the other hand, the European Union is experiencing inflation of 8.1% but has not yet raised its policy rate. The European Central Bank has, however, provided clear forward guidance. It intends to raise rates by 0.25% in July, by a possibly larger increment in September, and with gradual but sustained increases thereafter. Clear forward guidance is intended to help people make spending and investment decisions, and avoid surprises that could disrupt markets.

Pacing Interest Rate Hikes

Raising interest rates is a fine balancing act. If central banks raise rates too quickly, it’s like slamming the brakes on that car speeding downhill: the economy could come to a standstill. This occurred in the U.S. in the 1980’s when the Federal Reserve, led by Chair Paul Volcker, raised the policy rate to 20%. The economy went into a recession, though the aggressive monetary policy did eventually tame double digit inflation.

However, if rates are raised too slowly, inflation could gather enough momentum that it becomes difficult to stop. The longer high price increases linger, the more future inflation expectations build. This can result in people buying more in anticipation of prices rising further, perpetuating high demand.

“There’s always a risk of going too far or not going far enough, and it’s going to be a very difficult judgment to make.” — Jerome Powell, U.S. Federal Reserve Chair

It’s worth noting that while central banks can influence demand through policy rates, this is only one side of the equation. Inflation is also being caused by supply chain issues, a problem that is more or less outside of the control of central banks.

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Mapping the Migration of the World’s Millionaires

This graphic maps out the migration of millionaires across the globe, showing the top 10 countries the ultra-rich are moving to and from.

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Mapping the Migration of the World’s Millionaires

Throughout 2022, a projected 88,000 millionaires will move to a new country, according to the latest Henley Global Citizens Report.

Which countries are these millionaires moving to, and where in the world are they coming from?

This graphic maps the migration of high net worth individuals (HNWIs)—people with a net worth of over US$1 million—showing where rich people are flocking, and where they’re fleeing.

Migration of Millionaires is Back

Before diving into the country-specific data, it’s worth taking a step back to look at overall millionaire migration trends, and how things are changing this year.

2020 saw a drastic drop in the number of millionaire migrants, as pandemic-induced lockdowns kept people from leaving their home countries—and at times, their homes in general.

But as restrictions ease and countries begin to open up their borders again, the migration of millionaires is beginning to gather steam once again:

Year# of HNWIs that migratedY-o-y change
2018108,00014%
2019110,0002%
202012,000-89%
202125,000108%
2022P88,000252%
2023P125,00042%

Below, we’ll dive into which countries are seeing the highest number of HNWI migrants, and which ones are losing the most HNWIs.

Which Countries Are Millionaires Leaving?

There are a plethora of reasons why the ultra-rich move countries. Escaping conflict is one of them, which is why it’s no surprise to see Russia and Ukraine are projected to see some of the biggest emigration numbers by the end of 2022.

Here are the top 10 countries by millionaire outflows:

CountryProjected net outflows of HNWIs (2022)% of HNWIs lost
🇷🇺​ Russia15,00015%
🇨🇳​ China10,0001%
🇮🇳​ India8,0002%
🇭🇰 Hong Kong3,0002%
​🇺🇦 Ukraine2,80042%
​🇧🇷​ Brazil2,5002%
🇬🇧​ UK1,5000%
🇲🇽​ Mexico8000%
🇸🇦 Saudi Arabia6001%
🇮🇩 Indonesia6001%

Figures rounded to the nearest 100.

While Russia is expected to see 15,000 millionaires leaving the country, Ukraine is projected to experience the highest loss in percentage terms—a whopping 42% of its HNWIs could leave the country by the end of 2022.

China could also see a big loss in its millionaire population, with a projected loss of 10,000.
According to Andrew Amoils, Head of Research at New World Wealth, this could be more damaging to the country than in previous years, since general wealth growth in China has declined recently.

Where Are The Ultra-Rich Moving?

The United Arab Emirates (UAE) has become a millionaire magnet, with a projected 4,000 HNWIs flowing into the country by the end of 2022. This influx of ultra-wealthy people is partly because of the country’s accommodating immigration policies that are specially tailored to attract private wealth and international talent.

Here are the top 10 countries that saw millionaire inflows:

CountryProjected net inflows of HNWIs (2022)% of HNWI Gained
​​🇦🇪​ UAE4,0004%
🇦🇺​ Australia3,5001%
🇸🇬 Singapore2,8001%
​🇮🇱 Israel2,5002%
​​🇺🇸 USA1,5000%
​🇵🇹​ Portugal1,3002%
🇬🇷​ Greece1,2003%
🇨🇦​ Canada1,0000%
🇳🇿​ New Zealand8001%

Australia continues to attract HNWIs, coming in second behind the UAE. According to New World Wealth, approximately 80,000 millionaires have moved to the Land Down Under in the last two decades.

A few things that attract migrants to Australia are the country’s low costs of healthcare, its lack of inheritance tax, and its generally prosperous economy.

Where does this data come from?

Source: Henley Global Citizens Report 2022

Data notes: As countries reopen, and the invasion of Ukraine wears on, this will have ripple effects on where people choose to live. There are two main things to keep in mind when view the information above. 1) Individuals need to remain in a country for six months in order to be updated in the database. In many cases, it’s not yet clear where people leaving certain countries choosing to relocate. 2) In the graphic above, we’ve visualized the top 10 countries for inflows and outflows.

 

Update: This article and graphic have been updated to more clearly explain what’s being shown, and list the data source in a more prominent way. We appreciate your feedback.

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