The average American will pay $525,037 in taxes over their lifetime, according to a new study by financial technology company Self. Taxes for the purpose of this study included income taxes, state and local taxes, property taxes, sales taxes, and taxes on automobiles.

The report says this amount represents an average of 34.3% of lifetime earnings. Nearly two-thirds of the total tax paid, or roughly $340,000, comes from taxes on earnings, with the rest made up of sales, property, and car taxes.

The study used data from the 2019 Consumer Expenditure Report from the Department of Labor and divided household spending by two to estimate spending per person. It then applied state and federal tax rates to those spending and earnings estimates based on a working life of 36 years and an average life expectancy of 79 years.

The tax paid on earnings was based on state-level tax and federal income taxes when applied to the average salaries in each state. Interestingly, the lifetime tax on earnings totaled almost 65% of all taxes paid as you can see in the chart above.

Inheritance tax was excluded from this study as it was deemed the average American would not have to pay this due to inheritance thresholds not being exceeded. Marriage and its effect on taxes was also not applied to this study as it did not significantly impact taxes in the vast majority of cases representing the average American taxpayer.

The lifetime total taxes paid varies greatly by state. Residents of New Jersey will pay an average of $931,698, the highest total and greatest percentage of estimated lifetime earnings, 49.51% (nearly half), of any state. You can see the rest of the top 10 in the chart below.

From the standpoint of total taxes paid, these are the most expensive states in which to live in the country. Before we move on to the least expensive states, taxwise, look at the chart above again. Does anything stick out to you?

Now let’s look at the 10 states with the lowest overall tax burdens on average. These states include:

Again, from the standpoint of total taxes paid, these are the least expensive states to live in. Take another look at the table above. Does anything stick out to you on this one? I wish I could see your reaction because I’ll bet many of you have figured it out!

Here’s the point: In the first chart, all of those most expensive states are controlled by Democrats and have Democratic Governors. On the other hand, all but one of the less expensive states in the table just above are controlled by Republicans and have GOP Governors. The one exception just above is New Mexico which currently has a Democrat Governor.  

Quite a number of financial media sources picked up on this story and ran with it this week or last – including Bloomberg, Yahoo, Wall Street Journal, Inquirer, FiscalTimes, etc. as well as USAToday. Yet not one of those sources bothered to point out the political connection between the most and least expensive tax states and who controls the statehouses, as I did just above.

But I can tell you, many Americans who live in these high-tax states are definitely figuring it out! They are moving out of those high tax states in droves in favor of low tax states. States like Texas, Florida, and others with no state income tax are seeing tens of thousands of transplants each year. This is becoming a real problem for the high tax states, and they know it.

Texans have mixed feelings about all these newcomers. We hope they can take some of the 500,000+ unfilled job openings we have. For better or worse, Austin is the hands-down favorite spot in Texas to relocate, even though it is one of the most liberal cities in the state… Don’t get me started!

At least we don’t live or work in Austin. We live out in the “Hill Country” on beautiful Lake Travis with great scenery, lots of wildlife, and plenty of space. Our office is located in Bee Cave, Texas, a suburb of Austin. I’ll leave it there for today.