With Tax Day approaching, here’s a sobering thought: The average American pays $524,625 in taxes in their lifetime, according to a new study.
The report also ranks states on lifetime tax costs. And if you live in the Northeast, you may want to sit down for this:
New Jersey residents pay $987,117 in lifetime taxes, the analysis found, the highest tab in the nation. Washington, D.C., comes second, with a lifetime tax burden of $884,820. Connecticut and Massachusetts are third and fourth, at $855,307 and $816,700.
The lowest-tax state is West Virginia, with a lifetime cost of $358,407.
The report comes from the personal finance site Self Financial, based on research collected in January and February 2024. It considers taxes on income, homes, cars, clothing, food, drink, entertainment and personal care, drawing from tax data and several research sources, including the American Community Survey, the federal Consumer Expenditure Survey and Zillow.
The lifetime tax figure, $524,625, works out to about one-third of the average American’s lifetime earnings, which add up to roughly $1.5 million.
Taxation is on many people’s minds, given the looming April 15 federal tax deadline.
“Around this time of year, everybody has this come-to-Jesus moment: ‘Omigod, does it make sense to stay in the state of California, or the state of Connecticut, or the state of New Jersey?’” said Katy Song, chief financial planner at Domain Money.
Many Americans are moving from high-tax to low-tax states
The COVID-19 pandemic allowed many workers to live far from employers. Millions of Americans have migrated from state to state in the pandemic years, untethered from the office by the remote-work boom.
The number of people who moved between states rose from roughly 7.4 million in 2019 to 8.2 million in 2022, according to census data.
New Jersey, the state with the highest taxes in the Self Financial report, lost the most residents to other states in 2023, according to the annual National Movers Study from United Van Lines.
Five other high-tax states − California, Illinois, Kansas, Massachusetts and New York − rank in the top eight for outbound migration in the 2023 study.
Americans moved to several low-tax states in 2023, including Alabama, Arkansas, New Mexico, North and South Carolina, South Dakota and West Virginia.
The quest for lower taxes “has clearly factored into the migration,” said Chester Spatt, professor of finance at Carnegie Mellon University.
“You look at the outflow from California, for example,” a state ranked ninth for lifetime taxes in the Self Financial report. “California never used to have outflow.”