Depending on where you live, state income taxes and property taxes could cost you thousands of dollars every year. High sales taxes or gas taxes could slowly drain your funds every time you pull out your wallet. And it could get worse: Tax-reform proposals in Congress seek to eliminate or cap the federal deduction for state and local taxes paid, making their impact on your wallet that much greater.
For 2017, we prepared tax returns for two sample filers (see our methodology on the last slide for more details.) That gave us a better grasp of how each state’s income tax structure really hits – and points up the impact of local income taxes. Some states permit localities to impose their own income taxes, which range from a few percentage points in rural Ohio counties to New York City’s rather astonishing 3.9 percent.