Where millennials pay the highest taxes

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Five States With the Highest Taxes

Millennials, now the largest age cohort in America, are different than prior generations in a number of ways. They are less likely to get married, for instance. 65% of present day 18-to-35-year-olds have never been married, compared to the 40% of young adults who had never said "I do" in 1980.

Another key difference between millennials and prior generations is housing. Whereas in 1980 almost 44% of adults under age 35 owned their home, today that rate is just 35% (likely in part because millennials simply cannot afford to buy in many cities).

SEE ALSO: The 4 best cities to find a job

Wondering what you owe? Use SmartAsset's free income tax calculator.

Those differences have big implications for the taxes paid by millennial workers. For instance, the mortgage interest tax deduction is one of the largest sources of tax savings for many Americans, but millennials by and large do not benefit from it because they live in rentals.

Likewise, working millennials are putting less toward tax-free retirement savings than prior generations (in part because they are putting more toward student loan payments). On the other hand, in most cities, millennials earn less than the median income. That means they face lower-than-average marginal tax rates on their federal taxes and in states (or cities) with progressive tax rates.

Methodology

To find the cities where millennials pay the highest taxes, SmartAsset gathered data on millennials in the 100 largest U.S. cities. Specifically, we looked at the median income for persons age 18 to 34 in each of the counties that are home to those 100 cities. (For New York City, we averaged the median income of each of the five boroughs, weighting each by population.)

We ran those income numbers through our income tax calculator, which incorporates federal, state and local income taxes.

In making that income tax calculation we assumed that the typical millennial in each city will claim the standard deduction. We also assumed that she will file her taxes as a single filer, claiming one exemption (that is, she is unmarried and has no children).

Lastly, since millennials have historically been unable to save sufficiently for retirement (though that may be changing), we assumed they did not make any pre-tax contributions to a retirement account.

Find out now: what's the difference between a progressive tax and a regressive tax?

Key Findings

  • High incomes and high taxes in San Francisco. San Francisco has some of the highest taxes in the United States. Millennials in San Francisco have the second-highest median income in the country. For both those reasons, San Francisco millennials pay higher taxes than those anywhere else in the U.S.
  • Kentucky city taxes hit millennials. Despite median income for millennials that is lower than the national average, two Kentucky cities rank among the places with the 10 highest taxes on millennials. Kentucky's income tax structure means a state rate of 5.8% for the typical millennial, in addition to city rates of up to 2.75%.
  • Lowest rates in Florida, Texas and Nevada. They do not have state or local income taxes. Millennials in these states pay effective income tax rates of less than 17%.

millenial taxes 2 map ab Where Millennials Pay the Highest Taxes

1. San Francisco, California

In San Francisco, there are three levels of income taxes. First, there are the federal taxes paid by everyone in the U.S. We found that a San Francisco millennial earning median income will pay about $12,536 in federal income taxes.

Next, there's the California state income tax. Single filers earning between $51,530 and $263,222 pay a marginal tax rate of 9.3% in California, higher than the top marginal tax rate in all but two states. That results in another $2,562 in taxes from a typical millennial in San Francisco (based on the assumptions we outlined above). Lastly, San Francisco residents face a city income tax of 1.5%.

2. Arlington, Virginia

The country's wealthiest millennials live in Arlington. The median income among 18-to-34-year-olds in Arlington is $61,620, highest in the country. That means they also pay the highest federal income taxes. While the state income tax in Virginia is not quite as high as that of California, most taxpayers still pay a top marginal rate of 5.75%. For a millennial in Arlington earning median income, that adds up to over $3,040 in state taxes.

3. Washington, D.C.

Though the highest local marginal tax rate in Washington, D.C. is 8.95%, millennials earning the median income for their age group in the city will pay a lower rate. The top rate for workers with earnings between $40,000 and $60,000 annually is 7%. That is higher than the top rate in most states. Including federal taxes, we calculated that a median-income-earning millennial in D.C. will pay just over a quarter of total income in taxes.

Check out millennial salaries across the US:

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Millennial Salary Across US
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Where millennials pay the highest taxes

Median personal income for all employees: $31,100

Median income for millennials: $20,000

Median personal income for all employees: $44,000

Median income for millennials: $27,500

Median personal income for all employees: $33,000

Median income for millennials: $20,800

Median personal income for all employees: $30,000

Median income for millennials: $20,000

Median personal income for all employees: $35,000

Median income for millennials: $21,900

Median personal income for all employees: $38,000

Median income for millennials: $24,000

Median personal income for all employees: $44,000

Median income for millennials: $23,300

Median personal income for all employees: $38,000

Median income for millennials: $25,000

Median personal income for all employees: $55,000

Median income for millennials: $43,000

Median personal income for all employees: $30,000

Median income for millennials: $20,000

Median personal income for all employees: $33,000

Median income for millennials: $20,000

Median personal income for all employees: $37,000

Median income for millennials: $25,900

Median personal income for all employees: $30,000

Median income for millennials: $19,000

Median personal income for all employees: $37,500

Median income for millennials: $23,000

Median personal income for all employees: $33,000

Median income for millennials: $20,000

Median personal income for all employees: $35,000

Median income for millennials: $23,000

Median personal income for all employees: $35,000

Median income for millennials: $21,000

Median personal income for all employees: $31,000

Median income for millennials: $20,000

Median personal income for all employees: $33,000

Median income for millennials: $22,000

Median personal income for all employees: $33,400

Median income for millennials: $19,200

Median personal income for all employees: $45,000

Median income for millennials: $26,000

Median personal income for all employees: $44,000

Median income for millennials: $25,000

Median personal income for all employees: $33,700

Median income for millennials: $19,300

Median personal income for all employees: $39,000

Median income for millennials: $24,000

Median personal income for all employees: $30,000

Median income for millennials: $19,400

Median personal income for all employees: $32,900

Median income for millennials: $20,000

            

Median personal income for all employees: $30,000

Median income for millennials: $18,000

Median personal income for all employees: $34,400

Median income for millennials: $23,000

Median personal income for all employees: $33,000

Median income for millennials: $24,000

Median personal income for all employees: $40,000

Median income for millennials: $21,000

Median personal income for all employees: $44,000

Median income for millennials: $25,000

Median personal income for all employees: $30,000

Median income for millennials: $19,200

Median personal income for all employees: $40,000

Median income for millennials: $25,000

Median personal income for all employees: $31,900

Median income for millennials: $20,000

Median personal income for all employees: $36,000

Median income for millennials: $25,000

Median personal income for all employees: $35,000

Median income for millennials: $20,000

Median personal income for all employees: $32,000

Median income for millennials: $22,000

Median personal income for all employees: $32,000

Median income for millennials: $20,000

Median personal income for all employees: $36,000

Median income for millennials: $23,400

Median personal income for all employees: $37,200

Median income for millennials: $20,000

Median personal income for all employees: $30,000

Median income for millennials: $19,700

Median personal income for all employees: $32,200

Median income for millennials: $21,000

Median personal income for all employees: $31,000

Median income for millennials: $20,000

Median personal income for all employees: $34,000

Median income for millennials: $22,000

Median personal income for all employees: $31,000

Median income for millennials: $20,000

Median personal income for all employees: $35,500

Median income for millennials: $24,000

Median personal income for all employees: $40,000

Median income for millennials: $25,000

Median personal income for all employees: $40,000

Median income for millennials: $24,000

Median personal income for all employees: $31,000

Median income for millennials: $19,000

Median personal income for all employees: $35,000

Median income for millennials: $20,000

Median personal income for all employees: $37,000

Median income for millennials: $24,400

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4. New York, New York

NYC is America's largest city. It also has some of the country's highest state and local taxes. Our analysis found that a millennial earning $43,678 (the average among the median income for millennials in the five boroughs) would pay an effective state and local tax rate of 7.18%. That is the second highest state and local rate in the U.S., behind only Lexington, Kentucky.

5. Baltimore, Maryland

The median income for millennials living in the city of Baltimore is $39,561, 14th highest among the country's 100 largest cities. Yet, according to SmartAsset's analysis, millennials in Baltimore pay higher tax rates than those in many areas with lower earnings for millennials. This is largely because of the city of Baltimore's income tax. The city has a flat income tax of 3.20%, which pans out to the second-highest effective city rate in our study.

6. Philadelphia, Pennsylvania

The only place with a higher city tax on millennials than Baltimore? That would be Philadelphia. Philly residents pay a flat city rate of 3.92%. Millennials in the City of Brotherly Love still manage to pay lower overall taxes than Baltimore because of the state of Pennsylvania's relatively low 3.07% flat tax rate and because of slightly lower median earnings.

7. Lexington, Kentucky

The median income for millennials in Lexington is $32,703, according to the U.S. Census Bureau. That is lower than the average for the 100 largest U.S. cities. Nonetheless, those same millennials pay some of the highest tax rates, according to SmartAsset's analysis. The city of Lexington has its own income tax of 2.75%, third highest among the cities in our study. Additionally, the Kentucky marginal rate on income between $8,000 and $75,000 is 5.8%.

8. Portland, Oregon

The state of Oregon has no sales tax, but it has some of the highest income taxes in the country. The top rate is 9.9%, but most filers will pay the slightly lower (but still high) marginal rate of 9%. For single filers, that applies to income between $8,400 and $125,000. Overall, including federal taxes, we found that a millennial earning median income in Portland would pay an effective tax rate of 23.9%.

9. Louisville, Kentucky

While not quite as high as the local income tax in Lexington, Louisville's city income tax (which it calls an "occupational tax" of 2.2% still rates in the top 10 of all major U.S. cities. This 2.2% rate is withheld from paychecks. For a millennial earning the median income of $31,960 in Louisville, that adds up to $703.12 in annual taxes.

10. Boston, Massachusetts

Massachusetts has a flat income tax of 5.15%. That isn't especially high as compared with the income taxes in other states. However, because millennials in Boston have relatively high earnings (the median for that age group is $46,605, sixth highest among the largest U.S. cities), they pay higher federal rates. Overall, we calculated an expected tax bill just over $10,700 for a millennial earning that median income in Boston.

millenial taxes 1 table ab Where Millennials Pay the Highest Taxes

Photo credit: ©iStock.com/DavidCallan

RELATED: 10 strangest ways that states tax you...or don't
12 PHOTOS
10 Strangest Ways That States Tax You (or Don't)
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Where millennials pay the highest taxes
To preserve the uniqueness of their island paradise, Hawaii since 2004 has had an "Exceptional Tree" tax allowance. Landowners can deduct up to $3,000 from their income for expenses such as pruning and fertilization for any tree designated as rare, big, old or a combination thereof. That's per tree. Top-bracket earners taxed at the state's highest rate (11 percent) would save $330 via the deduction. The work must be done by a certified arborist, and the deduction can be claimed only every third year. Hawaii has had a list of "Exceptional Trees" since 1975, and there are now estimated to be more than a thousand thus designated.
Maine legislators tax anyone who deals in their official state fruit-blueberries, at the rate of 1.5 cents per pound. The resulting revenues-more than $1.6 million to state coffers in the fiscal year that ended in June 2013-are used to promote the crop and agricultural research. 
The state also taxes harvesters and processors of hard-shell clams (known in the state as mahogany quahogs) at $1.25 a bushel, but state revenues for that are much lower. 
Alabama is the last in the union to tax a deck of cards as if it were a "vice," like alcohol and tobacco. Taxing decks of cards, associated with gambling, was once fairly common, but most states have since set up separate control boards to regulate liquor and tobacco, and have let the cards slide.
But in Alabama, you'll still pay a 10 cent sales tax on any pack of cards you purchase. Retailers also have to pay $2 to the state each year for the privilege of selling playing cards.
Virginia levies a 50-cent excise tax on every lamb or sheep sold in the state. Both the Maine and Virginia taxes are examples of checkoff programs that collect taxes from an industry to fund promotional campaigns for the products. National commodity checkoff programs, authorized by the U.S. Department of Agriculture, have brought you campaigns such as "Beef: It's What's for Dinner" and "Got Milk?" But the Virginia program is extremely modest by comparison, having collected only $9,000 in fiscal year 2013. The funds go to the Virginia Sheep Industry Board, which spends them largely on predator control.
In 2013, in part to meet federal pollution-control mandates, Maryland legislators enacted fees on property owners in Baltimore and nine other Maryland counties, aimed at curbing storm water runoff. The fees were meant to fund programs to improve the water quality of the Chesapeake Bay, the largest marine estuary in the U.S. Sounds simple enough, but the way Maryland legislators wrote the law has led to an angry backlash in some corners against this so-called “rain tax.” One way localities calculate the tax is by measuring how much of a landowner’s tract is "impervious" to precipitation seeping into the ground. So the more you've developed it with buildings, driveways, tennis courts and the like, the less it will absorb and the more you pay. That's how the tax is being implemented (through aerial and satellite photos) in Montgomery County, a heavily developed suburb of Washington, and many landowners are up in arms. New Maryland Gov. Larry Hogan, a Republican, campaigned against this tax in his winning 2014 campaign and has introduced legislation to repeal it, though it’s not clear that will fly with Democratic state legislators. Money still needs to be raised to satisfy the federal pollution mandates, but the methods may change.
Kansas is among a bevy of jurisdictions that allows sale of lower-alcohol beer (the term of art is “cereal malt beverage”) in convenience and grocery stores. But Kansas also taxes “3.2” beer differently -- and there lies the rub. At a liquor store, all products, including, say, a conventional six-pack of Budweiser (with 5 percent alcohol by volume), are taxed at a special rate of 8 percent. At the convenience store down the street, however, ordinary sales tax is levied on the lower-alcohol, cereal malt beverage bottle of Bud. That often ends up being more than the 8 percent alcohol tax. In Pomona, Kansas, for example, the effective rate on the weaker beer would be 9.7 percent. Go figure.
When it comes to taxation, the rule is generally the stronger the booze, the higher the tax (that's why Kansas's beer tax scheme is an anomaly). California follows that curve, but at 100 proof, you better be ready to pay through the nose. Distilled spirits are taxed at $3.30 a gallon if below 100 proof, or 50 percent alcohol. Go over that, like with Bacardi 151, and the tax doubles to $6.60. Maryland also notes the 100 proof point, but it only adds 1.5 cents per proof, per gallon to the relatively modest liquor tax of $1.50 per gallon, taking the Bacardi 151 to $2.27 per gallon.
Entertainment venues pay a business tax to Nevada ranging from 5 percent to 10 percent on admissions fees (and food, drink and merchandise sales) whenever there’s live entertainment going on. There are exemptions, however, including this one, for businesses that provide "instrumental or vocal music, which may or may not be supplemented with commentary by the musicians, in a restaurant, lounge or similar area if such music does not routinely rise to the volume that interferes with casual conversation and if such music would not generally cause patrons to watch as well as listen." So your piano player can play “Feelings” softly and even crack a few jokes, tax-free, for your business. Just make sure they're not funny enough to attract attention.
Want to own a plush or fuel-thirsty ride? That’ll cost you extra in New Jersey. Cars that cost $45,000 or more or have a combined EPA fuel-mileage average of 19 or below pay an additional 0.4 percent on top of New Jersey’s 7 percent sales tax. 
In New Mexico, making it to 100 years has a payoff beyond the chance that Willard Scott will wish you a happy birthday: You don’t have to pay state income tax anymore. If you’ve been physically present in the state for at least six months and a resident of the state on the last day of the year, and you’re not someone’s dependent, you’re eligible. You’ll still need to file, and there are some complications if you’re married and your spouse doesn’t qualify.
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