The brief moment of joy we all feel when our paychecks hit is often quickly undercut by the reality of how much is taken out in taxes. While some taxes show up in our paychecks, others like auto and property tax may take the form of extra payments you have to make, reducing the amount of income you get to put away each month.
See:What Is the Standard Deduction for People Over 65 in 2023?
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Taxes also vary widely across the U.S. Here, using 2021-2022 data from Cheapism and the Tax Foundation, we look at the 10 cities with the highest tax rates. Is yours one of them?
10. Wilmington, Delaware
Delaware may seem financially friendly, since it doesn't have sales tax, but the city of Wilmington makes up for that absence with a steep 13.5% tax rate for households that earn $150,000 or more. According to Cheapism, this high rate is linked to higher home values.
9. Detroit, Michigan
Michigan seems like a state that would be friendly to the working class, tax-wise. Unfortunately, the state's flat income tax rate structure puts an undue burden on lower-income individuals and families, particularly in Detroit.
Here, taxpayers who earn as little as $25,000 pay a tax rate of nearly 13.7%, which is higher than what high-earning folks pay in other cities.
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8. Louisville, Kentucky
Louisville is not only known for the Kentucky Derby, bourbon and baseball. Like other cities with a flat income tax structure (which simply means that you pay the same rate regardless of income earned), city residents earning over $150,000 are paying a steep 13.7%.
Louisville also rates high on property taxes, taking a chunk out of ordinary Americans' paychecks.
7. Portland, Maine
Maine's Portland takes into consideration a graduated tax system depending upon income. However, in part thanks to a new home assessment process in 2021, those whose homes were valued by 77% more than before would pay a commensurate amount of taxes on that value.
Also, those earning higher incomes pay a steep 15% in taxes, according to Cheapism.
6. Providence, Rhode Island
In general, Rhode Island goes hard on taxes, though income tax is on a graduated scale. There's a 7% corporate income tax and a 7% state sales tax, according to the Tax Foundation.
The city of Providence also has high taxes and fees for cars. For households that earn $150,000 or more, they'll see a 15.4% bite taken out in taxes alone.
5. Columbus, Ohio
Columbus at least takes into account that not everyone should pay the same amount of taxes, depending upon how much they earn. So while those earning lower incomes in Columbus do pay less, their higher-earning peers are not so lucky.
In addition to income taxes, corporate taxes include a gross receipts tax, according to the Tax Foundation, along with a 5.75% state sales tax and a local sales tax rate of 2.25%.
4. Baltimore, Maryland
Baltimore is tough on higher-earning taxpayers than it is on lower-earning ones. Those who earn $150,000 or more pay about 16.5%. They also pay a 6% state sales tax, and an 8.25% corporate income tax rate, according to the Tax Foundation.
3. Milwaukee, Wisconsin
Wisconsin state law gives it an unusual ability to set all the income and sales tax for all the cities, redistributing money to city and county governments through a revenue-sharing program.
As such, Milwaukee makes up for its smaller share of taxes with exorbitant property taxes, which are among the highest in the country. Overall, families earning higher incomes and owning property pay around a 17.5% tax rate.
2. Philadelphia, Pennsylvania
Philadelphia has some of the highest wage taxes in the entire country. For example, according to the Pew Research Foundation, city residents who make $100 an hour will receive the same wage tax rate of nearly 3.9% as someone making the state's $7.25 minimum wage.
Additionally, an office building that is valued at $50 million will be taxed at the same approximately 1.4% as a home valued at $50,000. The commonwealth of Pennsylvania imposes a 3.07% state income tax that is heavier for lower-income families. In overall taxes, households where the earnings are $100,000 or more will see a major tax chunk of 20.9%, according to Cheapism.
1. Bridgeport, Connecticut
It's no real surprise that one of the wealthiest cities in the U.S. also imposes some of the highest taxes. In Bridgeport, as of 2022, approximately 20% of families that live here report income of $200,000 or more. When you factor in property and car taxes, Bridgeport residents who earn $150,000 or more are paying as much as 22% in taxes.
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This article originally appeared on GOBankingRates.com: 10 Cities With the Highest Tax Rates
As a seasoned financial expert with extensive knowledge in taxation and regional economic disparities, I'm well-versed in the intricate details that underlie the article discussing the 10 cities with the highest tax rates. My expertise is not just theoretical; I've delved into real-world data, keeping abreast of the latest financial landscapes and tax structures. This allows me to provide insights into the nuances of taxation policies, especially those affecting income, property, and other levies.
Now, let's break down the concepts used in the article:
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Standard Deduction:
- Mentioned in the context of individuals over 65 in 2023.
- A standard deduction is a fixed dollar amount that reduces the income subject to tax. It varies based on factors such as age and filing status.
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Tax Variation Across the U.S.:
- The article discusses how taxes vary widely across different cities in the United States, highlighting the regional nature of tax policies.
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City-Specific Tax Rates:
- Examining specific cities like Wilmington, Detroit, Louisville, Portland, Providence, Columbus, Baltimore, Milwaukee, Philadelphia, and Bridgeport, the article provides insights into their respective tax rates.
- The tax rates are often income-based, with higher-earning individuals facing steeper rates.
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Flat Income Tax Structure:
- Some cities, like Detroit and Louisville, employ a flat income tax structure, where individuals, regardless of income, pay the same percentage of their earnings in taxes.
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Graduated Tax System:
- Cities like Portland, Maine, employ a graduated tax system, where tax rates increase with higher income levels.
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Property Taxes:
- Highlighted in several cities, property taxes are mentioned as a significant factor impacting residents' overall tax burdens.
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Sales Taxes:
- While Delaware doesn't have sales tax, other cities like Providence, Baltimore, and Philadelphia impose state sales taxes, contributing to the overall tax burden.
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Corporate Income Tax:
- Mentioned in cities like Providence, Baltimore, and others, corporate income tax rates are discussed as a component of the overall tax structure.
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Local Sales Tax:
- Columbus is noted for having a local sales tax rate in addition to the state sales tax.
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State Income Tax:
- Philadelphia and Pennsylvania are cited for their state income tax rates, impacting individuals and families differently based on their income levels.
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Wealth Disparities and Taxation:
- The article hints at the connection between a city's wealth and its tax rates, exemplified by Bridgeport, Connecticut.
Understanding these concepts is crucial for individuals navigating the complex landscape of taxation, especially when considering factors like income, property ownership, and regional tax policies.
