Connecticut Has The 2nd Highest Tax Rates In the U.S.: New Report

CONNECTICUT — Among Ben Franklin's most memorable quips is his reminder that "nothing is certain except death and taxes." A new report raises a question about which of those inevitable nuisances Connecticut residents fear more.

The data compilation from personal finance website WalletHub broke down multiple categories of tax rates in every state and determined that Connecticut has the second-highest effective total state and local tax rate, at 14.8 percent. Only Illinois, at 15.05 percent, squeezes harder.

Taxes are, of course, a shell game. A state may tout its low income tax while more than making its revenue goals with a hand in a different pocket. Washington residents don't pay income tax, but still end up spending over 8 percent of their annual income on sales and excise taxes. Citizens of Texas don't pay a dime of income tax, but fork over 1.74 percent of their simoleons on real estate taxes, one of the highest rates in the country. WalletHub's analysts took into account a state's taxes for real estate, vehicle property, income, and sales & excise to calculate its overall pain index.

Looking at the state-by-state tax category breakdowns, it's clear how Connecticut's aggregate score was so low. The Nutmeg State boasts the 3rd highest effective real estate rate and 7th highest effective vehicle property rate among the 50 states and District of Columbia.

Here's the complete breakdown and ranking of state tax rates, as compiled by WalletHub:

More on how WalletHub calculated its "effective" rates in each category can be found here.

The taxman's sting might not be so sharp if we had more confidence that the government wasn't inclined to spend recklessly, but the data, again, paints a glum picture. The WalletHub nationally representative survey of over 200 citizens indicates a whopping 72 percent of Americans believe their elected officials do not spend their tax dollars wisely. That number jibes with the percentage of people in this country who believe their current tax rate is too high (again, 72 percent).

Still, we do get something for our taxes — those roads aren't going to pave themselves. In fact, studies suggest that households pay less in taxes than they consume in services, according to G. Jason Jolley, professor of rural economic development, Voinovich School of Leadership and Public Service at Ohio University.

The fuzzy end of that lollipop is that businesses pay more in taxes than they get back in services.

"As such, places like bedroom communities may struggle to collect enough taxes to pay for the quality-of-life amenities unless they also have a strong commercial tax base," Jolley said.

Worse still, the professor said the rise of remote and hybrid work following the COVID-19 pandemic has thrown a monkey wrench into the data sets, and may "require a reexamination of how and where people pay taxes."

Just when you thought you couldn't hate doing your taxes any more…

*Assumes "Median U.S. Household" has an annual income of $69,508 (mean third quintile U.S. income); owns a home valued at $244,900 (median U.S. home value); owns a car valued at $26,220 (the highest-selling car of 2022); and spends annually an amount equal to the spending of a household earning the median U.S. income.
**National Average of State and Local Tax Rates = 10.79 percent
***Assumes “Median State Household” has an annual income equal to the mean third quintile income of the state; owns a home at a value equal to the median of the state; owns a car valued at $26,220 (the highest-selling car of 2022); and spends annually an amount equal to the spending of a household earning the median state income.