New Yorkers pay highest tax rate to state, local governments

By Bernie Becker - 10/23/12 07:05 PM ET

New York residents shelled out more in state and local taxes than people living in any other state, the Tax Foundation reported Tuesday.

In all, New Yorkers paid 12.8 percent of their incomes to state and local authorities in 2010, with two of its neighbors, New Jersey (12.4 percent) and Connecticut (12.3 percent), coming in second and third respectively in the Tax Foundation study.

The states making up the Tri-State area have held the top three spots in the Tax Foundation study since 2005, and each had a state and local tax burden in 2010 at least a full percentage higher than the fourth-place state, California.

On average, the group found that people in the U.S. pay 9.9 percent of their incomes to state and local governments.

In its study, the Tax Foundation, a Washington group that advocates for a simpler tax code and lower rates, tries to account for how much taxes a state’s residents pay, instead of how much a certain state collects.

For instance, a vacationer from Maryland would pay sales taxes to Florida if they traveled to Disney World. But the Tax Foundation study would count those payments for Maryland.

With that in mind, Elizabeth Malm, an economist with the foundation, said that some states were better than others at shifting the tax burden to nonresidents. Alaska, for instance, uses a tax on oil extraction to help lower tax bills for its residents.

“Resource-rich states, such as Alaska and Wyoming, are only the most dramatic examples of tax exporting,” Malm said in a statement.

“Major tourist destinations like Nevada and Florida are able to lower residents’ burden by taxing tourists, who are often nonresidents. Nationwide, over a quarter of all state and local taxes are collected from nonresidents.”

Alaskans have a 7 percent state and local tax burden, almost a full three percentage points below the national average. Five other states (Texas, Wyoming, Louisiana, Tennessee and South Dakota) also checked in at under 8 percent.

The Tax Foundation said that New York, New Jersey and Connecticut topped the list in part because their residents have comparatively high incomes, and the states are relatively high spenders.