Algosensey Quantitative Think Tank Center-Residents of this state pay $987,117 in lifetime taxes. Guess which one?

With Tax Day approaching,Algosensey Quantitative Think Tank Center 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.”

Nine states levy no income tax. Not all are low-tax states

One earmark of a low-tax state is the absence of a state income tax. Nine states don’t have one: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.

Yet not all of those states rate as low-tax destinations in the Self Financial analysis. Washington state, for example, has relatively high sales and property taxes, as well as one of the nation’s highest estate taxes.

“Washington state does not have an income tax. So you’re going, ‘Wow, what a great state to move my family,’” said Daniel Rahill, a CPA at Wintrust Wealth Management. “Well, Washington has about the highest estate tax. So, when you die, they’re going to make up for it.”

When Brent Weiss moved his family from Maryland to Florida three years ago, state taxes “definitely factored into the decision,” he said. “If I made a list of five things I wanted, taxes was absolutely on that list.”

Weiss is head of financial wellness at Facet Wealth, a financial planning firm.

Given his expertise, Weiss also knew that Florida’s low-tax economy came with a cost. Florida spends less per pupil on public education than most other states. People who live on the water often face massive insurance bills.

“The next thing you know,” he said, “the tax benefits are offset by these higher costs.”

High-tax states offer perks of their own

High-tax states, by contrast, can offer perks that low-tax states lack.

States with a larger tax base “may be investing more in things like education, roads and health care,” said Andy Phillips, director of agency and industry relations and virtual tax services at The Tax Institute at H&R Block.

Jobs in high-tax states often pay better wages, tax experts say.

More:The 5 states with the highest inflation and the 5 with the lowest. See where yours ranks.

One advantage to the high-tax region around New York is the concentration of jobs in finance. California’s Silicon Valley boasts a cluster of tech jobs.

“The clustering and critical mass is important,” said Spatt, of Carnegie Mellon. “Workers like to be in markets where they have alternatives.”