What’s the Tax Burden in Your City?

March 12, 2014 | By: TaxCure Staff

city tax burdenWhen it comes to paying taxes, where you live matters. While many of us focus on the amount we pay in federal taxes, the reality is that there are a number of taxes that we pay. In fact, your local taxes might be taking a bigger bite out of your income than you expect.

From property taxes to sales taxes to state and local income taxes, you might be surprised at what you’re paying. Earlier this year, the Office of the Chief Financial Officer of the District of Columbia released its annual report on tax rates and tax burdens. The report looks at the year 2012, and identifies the cities with the highest and lowest tax rates, referencing the largest city in each state.

Cities with the Highest Tax Rates

The report takes a look at families in the identified cities in different tax brackets and also takes into account the unemployment rate. The city with the highest tax burden, according to the report, is Bridgeport, Conn. According to the report, a family of three with earnings of $150,000 per year would pay more than 22 percent of its income in state and local taxes, while a family of three earning $25,000 pays about 16 percent of its income in state and local taxes.

However, Bridgeport also contains a high percentage of households that make more than $200,000 a year (the highest in the country), and high home values. A large portion of the tax burden is set down to property taxes.

Other cities with high tax burdens include Philadelphia, Pa., Milwaukee, Wisc., Baltimore, Md., Columbus, Ohio, Providence, R.I., Portland, Maine, Louisville, Ky., Detroit, Mich., and Wilmington, Del. I was surprised to see that prominent West Coast cities didn’t make the top 10. So, even though large cities might have a high cost of living, the local tax burden isn’t as high as it is in some of the more affluent localities in the country.

Cities with the Lowest Tax Rates

Of course, the flip side to high tax rates is to look at cities with lower tax burdens. The city with the lowest tax burden is Cheyenne, Wyo. As someone who lives in a state bordering Wyoming, it doesn’t surprise me that Cheyenne has one of the lowest overall tax rates. Wyoming features very low state tax rates on gasoline, has a relatively low sales tax, and has one of the lowest effective property tax rates in the country.

The report says that in 2012, a family earning $25,000 paid almost 10 percent in state and local taxes while a family earning $150,000 per year paid 4.2 percent, which represents the lowest local tax burden for a family earning $150,000 per year. I found it interesting that those with lower incomes paid a higher state and local tax burden (as a percentage of income) than those earning more.

Other cities with low tax burdens include Las Vegas, Nev., Billings, MT, Anchorage, Alaska, Sioux Falls, S.D., Jacksonville, Fla., Seattle, Wash., Honolulu, Hawaii, Birmingham, Ala., and Houston, Texas.

In my state, Salt Lake City ranks as number 36 for the overall tax burden. Where does your closest city rank?