With the April 15 tax-filing deadline approaching, a new WalletHub analysis is putting New Jersey taxpayers on notice: the Garden State ranks among the most expensive places in America for state and local taxes — even as many residents are already bracing for the annual hit from federal income taxes.
On average, the typical U.S. household pays nearly $14,000 in federal income taxes each year, according to the analysis. But WalletHub found the real swing factor for many families comes at the state and local level — and New Jersey stands out for all the wrong reasons.
In WalletHub’s national ranking of “Taxes by State,” New Jersey placed 47th out of 51 jurisdictions (the 50 states plus Washington, D.C.), meaning only Pennsylvania, Connecticut, New York and Illinois ranked worse overall.
The study estimates New Jersey’s effective total state and local tax rate at 14.06%, translating to about $11,416 in annual state and local taxes for a “median U.S. household” used in the analysis. That’s roughly 27.6% higher than the national average effective tax rate of 11.02%, WalletHub said.
“Every year during tax season, Americans are reminded of just how much of their hard-earned income isn’t theirs to keep,” said Chip Lupo, a WalletHub analyst. “Living in the right state can ease the stress of tax time, though, as taxpayers in the least expensive states pay less than half as much as those in the most expensive states.”
New Jersey’s high ranking is largely fueled by its notoriously steep property taxes — a perennial complaint from homeowners across the state.
WalletHub’s breakdown puts New Jersey at No. 51 in effective real-estate tax rate, the worst in the nation, at 8.65% in its model — with an estimated $7,022 in real-estate taxes for the median U.S. household assumptions used in the study.
New Jersey’s effective income tax rate in the WalletHub model is 1.11% (ranked 13th), and its sales and excise tax rate is 4.30% (ranked 14th). But even relatively moderate income and sales tax burdens don’t offset the weight of real-estate taxes in much of the state — especially in counties where home values and school budgets push annual property tax bills into five figures.
WalletHub’s report also underscores a key point often missed in political debates: low or zero state income tax doesn’t automatically mean taxpayers get a bargain.
The report points to Washington, which has no state income tax but still sees residents spend nearly 9% of annual income on sales and excise taxes. Texas also has no income tax, but residents spend 1.49% of income on real estate taxes, one of the highest rates in the country.
That dynamic is relevant in New Jersey, where residents frequently compare their bills to Florida or Texas — states that can advertise “no income tax,” but often rely more heavily on other revenue streams.
At the top of the WalletHub ranking — meaning the lowest overall state and local tax burdens — were Alaska (No. 1), Delaware (No. 2), and Wyoming (No. 3). At the bottom: Illinois (No. 51), New York (No. 50), Connecticut (No. 49), Pennsylvania (No. 48), and New Jersey (No. 47).
New Jersey’s position near the bottom is likely to add fuel to a familiar conversation in Trenton: how to keep middle-class families from feeling priced out, particularly homeowners and retirees on fixed incomes.
For many New Jersey residents, the tax question isn’t simply how much they owe the IRS — it’s whether the state’s combination of property taxes, fees and other local costs is sustainable long-term, especially as household budgets tighten in an uncertain economy.