Most and Least Taxing States 2012

Bloomberg

No one likes paying taxes -- well, except Warren Buffett, maybe. But residents of certain states have far more reason to vent about how much they pay in taxes, whether it's property, income, sales, inheritance or estate taxes. Research into state taxes by Bloomberg BNA, combined with data from the Tax Foundation and the Bureau of Economic Analysis, shows which residents have the greatest venting -- or bragging -- rights.

Retirees in 13 states, including Colorado, Connecticut and Montana, have their Social Security income taxed. Seven states, including Hawaii, Kansas and Oklahoma, don't give state residents the usual break on sales tax for groceries. (Most states either don't tax food bought for home consumption or apply a lower rate.) And if oil prices rise, residents in states such as Georgia, Vermont and Kentucky will see the tax they pay at the pump rise. Those states impose tax based on a percentage of the total gas purchase, rather than a fixed amount based on the number of gallons, according to the Institute on Taxation and Economic Policy.

[Related: Your April Tax To-Do List]

Almost every state charges some kind of sales tax, though residents in five states, including Delaware and New Hampshire, escape both state and local sales taxes, according to the Tax Foundation. Below are the states that take the biggest and smallest tax bites when you buy:

Highest Sales Tax States:

1. Tennessee
Combined state and average local sales tax rate: 9.45%
Income tax: None
Sales tax: 7%
Property tax per capita:
$752
Inheritance tax: None*
Estate tax: 5.5% to 9.5% with a $1 million exemption

Tennessee does not tax income, apart from a 6 percent levy on interest and dividends. Capital gains are exempt. Still, investors should be aware that the state inheritance tax allows tax-free transfer only to a spouse. According to the Tax Foundation, Tennessee leads the pack in state and local sales tax rates, with a combined rate of 9.45 percent.

*Tennessee calls its tax on dying an "inheritance tax," but it functions as an estate tax.

2. Arizona
Combined state and average local sales tax rate: 9.12%
Income tax: 4.54%
Sales tax: 6.6%
Property tax per capita: $1,043
Inheritance tax: None
Estate tax: None

The tax burden in Arizona is small compared with that of other states because of its lower-than-average property taxes, so the decline in home prices has hit Arizona's municipalities harder than those in many other states. A bid to close state and local budget gaps by forcing Amazon and other retailers to collect sales tax ended in the state Senate after lawmakers worried that the online retailer would respond by pulling its distribution center from the state. Arizona ranks second in combined state and local sales taxes, at 9.12 percent.

3. Louisiana
Combined state and average local sales tax rate:
8.85%
Income tax: 6%
Sales tax: 4%
Property tax per capita: $643
Inheritance tax: None
Estate tax: None

In 2012, Louisiana began paying out tax refunds in the form of debit cards instead of checks. That drew complaints from taxpayers who found refunds subject to ATM fees. Louisiana suffered a decline of 14.16 percent in taxes collected in 2010, due largely to a 22 percent drop in income taxes. It was one of four states that saw a double-digit drop. The state's among the top five in "severance tax" income -- tax paid on natural resources taken from the ground; the oil-and-gas industry paid $758 million in 2010. Its combined state and local sales tax rate of 8.85 percent is the third-highest of the states.

4. Washington
Combined state and average local sales tax rate:
8.80%
Income tax: None
Sales tax: 6.5%
Property tax per capita: $1,199
Inheritance tax: None
Estate tax: 10% to 19% with $2 million exemption

Washington may be a good place to make millions, though it may not be the best place to die with them. It taxes neither income nor capital gains and does not levy a net corporate income tax. Washington does, however, maintain a high estate tax on multimillionaires. And getting around the state can be costly -- it has the highest gas tax in the country, at 37.5 cents per gallon. Its combined state and local sales tax rate of 8.8 percent is fourth-highest among the states.

5. Oklahoma
Combined state and average local sales tax rate:
8.66%
Income tax: 5.5%
Sales tax: 4.5%
Property tax per capita: $582
Inheritance tax: None
Estate tax: None

Oklahoma's economy grew enough to trigger a decrease in income tax: The top rate was lowered from 5.5 percent to 5.25 percent for 2012. A 15 percent increase in revenues from 2011 may pave the way for a further cut in the state's rate to 4.75 percent over two years. Oklahoma is one of seven states that tax groceries at the full sales tax rate, according to Bloomberg BNA. Its combined state and local sales tax rate of 8.66 percent ranks it fifth among states.

[Related: 10 Ways to Shop Smarter This Year]

Lowest Sales Tax States*:

1. Alaska
Alaska has no state sales tax. Average local sales tax rate: 1.77%
Income tax: None
Sales tax: None
Property tax per capita: $1,559
Inheritance tax: None
Estate tax: None

Alaska gets significant income from corporate taxes, mostly from the oil-and-gas industry. The state collects high revenue per person -- $7,145 in 2009, according to the Tax Foundation -- without collecting income, state sales tax or inheritance tax. Its local sales tax rate is 1.77 percent. Local investors don't pay state tax on capital gains because there is no income tax. However, at $1,559 per person, property taxes are relatively high.

2. Hawaii
Combined state and average local sales tax rate:
4.35%
Income tax: 11%
Sales tax: 4%
Property tax per capita: $977
Inheritance tax: None
Estate tax: 0.8% to 16% with $3.6 million exemption

Hawaii and Oregon tie for highest income tax rate in the country. Hawaii is one of the few states that offer favorable tax treatment of capital gains -- they're taxed at 7.5 percent. In 2010 the state reinstated its estate tax for those who died after April 30, 2010. The state is one of seven that impose the full sales tax rate on groceries, according to Bloomberg BNA. Hawaii's combined state and local sales tax rate of 4.35 percent places it near the bottom of the pack, however.

3. Maine
Maine has no local sales tax. State tax rate: 5%
Income tax: 8.5%
Sales tax: 5%
Property tax per capita: $1,636
Inheritance tax: Estate taxes range from 0.8% to 16%
Estate tax: 0.8% to 16% with a $1 million exemption ($2 million for 2013 and after)

Maine will lower its top income tax rate to 7.95 percent beginning in 2013. The state collects a high amount of property tax per person, in part because of the high number of second homes owned by residents of other states who come for Maine's seashore, lobster and blueberries. Maine imposes its 5 percent state sales tax on medical marijuana. A 7 percent tax rate on prepared food applies if the herb is baked into brownies.

4. Virginia
Virginia has no local sales tax. State tax rate: 5%
Income tax: 5.75%
Sales tax:* 5% (4% state, 1% local)
Property tax per capita: $1,362
Inheritance tax: None
Estate tax:* None

Virginia heads into 2012 with a major shortfall in transportation funding. Governor Robert McDonnell has rejected the idea of indexing the state's gas tax to inflation, even though the levy has not been raised since 1986. The governor's latest plan: fund the highway system by selling naming rights to portions of the state's roadways.

*The Tax Foundation includes a "separate, uniform, 'local' add-on tax" in the state rate.

5. South Dakota
Combined state and average local sales tax rate: 5.39%
Income tax: None
Sales tax: 4%
Property tax per capita: $1,072
Inheritance tax: None
Estate tax: None

Investors in South Dakota are happy to hold on to their capital gains. With taxes low in a sparsely populated state, South Dakota collected less state tax than any other -- $1.3 billion in 2010, according to U.S. Census data. The state is one of seven that do not offer a sales tax break on purchases of groceries, according to Bloomberg BNA. Its combined state and local sales tax of 5.39 percent is among the lowest of the states.

* Excludes states with no state or local sales tax, such as Delaware, Montana and New Hampshire.

Click here to see the full list of Most and Least Taxing States.

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