Top Ten States with the Lowest Tax Burden

10. South Carolina

> Taxes paid by residents as pct. of income: 8.4%
> Total state and local taxes collected: $13.16 billion (24th lowest)
> Pct. of total taxes paid by residents: 66.7% (19th lowest)
> Pct. of total taxes paid by non-residents: 33.3% (19th highest)

South Carolina’s state and local tax burden, at 8.4% of income, was 1.5 percentage points lower than the
national rate. For the fiscal year 2010, South Carolina collected just $1,909 per person, less than all but a
handful of states. The state collected little in the way of taxes despite the fact that all income over $14,000
was taxed at 7%, the state’s highest personal income tax rate. However, not all taxes in South Carolina were
low: the state’s excise tax on beer was the fifth highest in the country, at 77 cents per gallon.

9. Nevada
> Taxes paid by residents as pct. of income: 8.2%
> Total state and local taxes collected: $10.14 billion (19th lowest)
> Pct. of total taxes paid by residents: 56.0% (6th lowest)
> Pct. of total taxes paid by non-residents: 44.0% (6th highest)

Fortunately for Nevadans, the state’s large gaming industry helps to alleviate the tax  burden, as only 56% of
taxes paid to Nevada and its local government came from residents. Nevada charges a 6.75% tax on gross
gaming wins, although the American Gaming Association noted that Indiana and Pennsylvania collected
more in direct gambling taxes than Nevada in 2010. The state doesn’t charge any income tax, but it was
able to gain revenue from its residents in other ways. The state’s sales tax of 6.85% was the eighth highest
in the country. Nevada also had a 33.1 cent excise tax on a gallon of gasoline, the sixth highest in the U.S.

8. Alabama
> Taxes paid by residents as pct. of income: 8.2%
> Total state and local taxes collected: $13.28 billion (25th lowest)
> Pct. of total taxes paid by residents: 68.0% (21st lowest)
> Pct. of total taxes paid by non-residents: 32.0% (21st highest)

Alabama has the seventh lowest per capita income in the U.S., at $33,499.  However, residents also have a
low 8.2% tax burden, compared to a 9.9% national average. In 2010, Alabama residents paid $2,740 in
taxes per capita, the third lowest of all states. Contributing to the low tax burden was a property tax per
capita of $506, the lowest of all 50 states. Alabama’s sales tax of 4% is below the national median of 6%.
Alabama’s cost-of-living index was also among the lowest in the country.

7. New Hampshire
> Taxes paid by residents as pct. of income: 8.1%
> Total state and local taxes collected: $5.02 billion (9th lowest)
> Pct. of total taxes paid by residents: 56.3% (7th lowest)
> Pct. of total taxes paid by non-residents: 43.7% (7th highest)
While New Hampshire residents in 2010 paid $2,210 per capita in taxes to the state, residents also paid
$1,507 out-of-state, the fifth-highest amount in the country. The Tax Foundation notes that New Hampshire
had “one of the nation’s most simple and inexpensive” personal income tax systems in the country. The
state had a flat income tax of 5%, and even that was just on dividend and interest income, giving many
citizens little or no income tax liability. New Hampshire was also one of just five states without a sales tax. It
is therefore heavily reliant on property taxes, which were 5.68% of income in 2010, the highest rate in the
country.

6. Texas
> Taxes paid by residents as pct. of income: 7.9%
> Total state and local taxes collected: $86.50 billion (3rd highest)
> Pct. of total taxes paid by residents: 63.8% (15th lowest)
> Pct. of total taxes paid by non-residents: 36.2% (15th highest)

Texas’ state and local tax burden of 7.9% was unchanged in 2010 compared to 2009, and has been below
8% since 1996. The low tax burden was helped by the fact that individuals arenot required to pay any
income tax. Texas had a 6.25% sales tax, 13th highest of all states, and property tax collections of $1,461
per capita were 14th highest. Because it is the second most populous state, Texas still collected over $86
billion in state and local taxes, more than all states except California and New York.

5. Wyoming
> Taxes paid by residents as pct. of income: 7.8%
> Total state and local taxes collected: $3.48 billion (5th lowest)
> Pct. of total taxes paid by residents: 33.1% (2nd lowest)
> Pct. of total taxes paid by non-residents: 66.9% (2nd highest)

 
Wyoming is just one of two states where more than two-thirds of the total tax revenue came from non-
residents. The oil and gas industry provided $1.9 billion to state coffers in fiscal 2010. The state is just one of
seven that does not levy any income tax, while its 4% sales tax was significantly lower than the national
median of 6%. Wyoming residents made that up in property taxes. State and local governments received
$2,321 in property taxes per capita, the fourth highest in the U.S.

4. Louisiana
> Taxes paid by residents as pct. of income: 7.8%
> Total state and local taxes collected: $16.15 billion (24th highest)
> Pct. of total taxes paid by residents: 53.1% (4th lowest)
> Pct. of total taxes paid by non-residents: 46.9% (4th highest)

The tax burden on Louisiana residents fell from 8.2% in 2009 to 7.8% in 2010. Property taxes were low, at
just $698 per capita. Sales taxes of 4% also ranked below the national median of 6%. While the state’s top
income tax rate of 6% as high, this rate kicked in only for income above $50,000. Total income tax
collections in Louisiana came to just over $500 per person in 2010, compared to a national rate of $767 per
person.
3. Tennessee
> Taxes paid by residents as pct. of income: 7.7%
> Total state and local taxes collected: $18.24 billion (23rd highest)
> Pct. of total taxes paid by residents: 63.2% (13th lowest)
> Pct. of total taxes paid by non-residents: 36.8% (13th highest)

In Tennessee, residents paid just 7.7% of their income in taxes in 2010, the nation’s third-lowest rate.
However, of the $2,707 in tax revenue per person that residents paid, just $1,844 was paid out to
Tennessee, with the rest going to other states. Tennessee had a 6% personal income flat tax, although this
only applied to interest and dividend income. Tennessee also did not charge any state-level property taxes,
and localities’ property tax collections equaled just 2.18% of income, less than all but a half-dozen states.
However, Tennessee’s combined state and local sales tax rate of 9.43% was the nation’s highest.

2. South Dakota 
> Taxes paid by residents as pct. of income: 7.6%
> Total state and local taxes collected: $2.58 billion (the lowest)
> Pct. of total taxes paid by residents: 57.0% (8th lowest)
> Pct. of total taxes paid by non-residents: 43.0% (8th highest)

South Dakota collected just under $2.6 billion in taxes in 2010, less than any other state. It collected just
$1,857 per resident, less than only Mississippi, Tennessee and Alabama. This is accounted for by the fact
that South Dakota has no personal or corporate income tax, although the Tax Foundation noted that there is
a bank franchise and bank card tax.

1. Alaska
> Taxes paid by residents as pct. of income: 7.0%
> Total state and local taxes collected: $6.17 billion (11th lowest)
> Pct. of total taxes paid by residents: 24.5% (the lowest)
> Pct. of total taxes paid by non-residents: 75.5% (the highest)

Less than a quarter of all taxes in Alaska were paid by residents, by far the lowest rate in the U.S. Oil taxes
made up the vast majority of the state’s revenue collection, amounting to $6.2 billion in 2010 and $7 billion in
2011, and likely to be even higher in 2012 due to rising oil prices. Alaska was one of just seven states
without an individual income tax and one of just five without a state sales tax. However, Alaska collected
$1,714 in property taxes per capita, the 10th highest of all states.