On April 15, most Americans wish they lived in a lower tax state. So which states are the ones with lower taxes? Are they red or blue states? And would you be paying more taxes if you lived in a Canadian province?
Most articles look at the national tax levels, comparing them to the past. Those that compare states on the subject look at income taxes, perhaps sales taxes, and maybe gas taxes. But few examine the total tax burden you’d face.
To determine this, look at the Economic Freedom in North America, a dataset published by the Fraser Institute. And you’ll find where in America, or Canada, you’d be paying the most, or least, in taxes.
So how does the Fraser Institute look at taxes? Their rankings cover the total tax revenue as a percentage of GDP, the top marginal income tax rage and income threshold at which it applies, indirect tax revenue as a percentage of GDP, and sales taxes collected as a percentage of GDP. They call it “discriminatory” because, according to Economist Jim Gwartney in the EFNA 2013 report, “High marginal tax rates discriminate against productive citizens and deny them the fruits of their labor.”
Low Tax States…And Provinces
You may not be surprised to learn that Alaska has one of the lowest tax burdens, but you may be surprised to learn that number two and three on the list of low tax places are both Canadian provinces: Alberta and Saskatchewan. In fact, Newfoundland, is 11th on the list as well.
But among the best places to be in if you don’t want to pay as much in taxes in the United States, you’re better off in Louisiana, Delaware, Texas, Oklahoma, Nevada, Georgia and South Dakota. Next on the list are Wyoming, Tennessee, Virginia, and North Carolina.
Top States and Provinces
But don’t think that moving to Canada will reduce your tax burden. Of all U.S. States and Canadian provinces, the latter make up the four highest regions you’ll find for a tax burden: Nova Scotia, Prince Edward Island, Quebec and Ontario. In fact, six of the top seven are found north of the United States of America.
Among the American states which top off the tax burden, you’ll find New Jersey (fifth highest), followed by Rhode Island (eighth), Maine (ninth), and Vermont (tenth) in North America. The next five with the highest burdens are Hawaii, New Mexico, Arkansas, Wisconsin, and British Columbia.
Do You Pay More In A Red State Or Blue State?
Just as it’s a complicated answer when you ask whether it is better to be taxed in America or Canada, it’s the same thing with a red state or blue state. After all is New Jersey a blue state because it voted for Obama twice, or a red state because Republican Chris Christie is the state’s governor? The same can be said of Maine, New Mexico and Wisconsin.
On the other hand, high tax Arkansas has voted Republican since 2000, but had a Democratic Governor from 2006 through 2014. Low tax Nevada has had a GOP Governor since 1994, but has voted Democratic in the last two elections.
When examining states with GOP governors and voted GOP (as well as states with Democratic governors and cast Democratic votes for president), there does seem to be a general advantage for GOP states (six of ten low tax states) than blue states (one of the ten low tax states, and three of the ten high tax states).
If there’s a lesson to be learned, it means doing your homework. Don’t assume that because you live in a “red state” that you’ll have a lower tax burden, any more than all Canadian provinces pay a higher tax burden than their American counterparts. Find out what you’d actually pay in each state or province, not what politicians tell you.
John A. Tures is a professor of political science at LaGrange College in LaGrange, Ga.