Top 10 Low Tax States

The 10 lowest tax states have low-cost state governments.

The 10 lowest tax states have low-cost state governments.

Prices in Alaska are high, but in 1980, instead of collecting state income taxes or sales taxes, the state sent its residents checks. This makes it one top-10 low-tax states that make up operating income in some enterprising ways. The only thing they all have in common is that their per-resident cost for government is low.

No. 1 Alaska

Alaska repealed its income tax in 1980, following the 1977 completion of the Alyeska/Trans-Alaska pipeline. Every year, the state sends dividend checks to its residents. The state has projected revues of 8.9 billion for 2012, and the money continues to flow back to the residents, who pay only 6.3 percent of their income for the $18.8 billion cost of state government. Alaska is also one of the five states without a sales tax.

No. 2 Nevada

Nevada is the second-lowest. Almost half the state’s tax revenue comes from drinking, gambling and smoking nonresidents. The locals pay 52.5 percent of the $20 billion cost of government, or about 7.5 percent of their income. The sales tax is 6.85 percent, and counties and cities can add to the $0.33 that state gasoline taxes already adds to the cost of each gallon of gas.

No. 3 South Dakota

In South Dakota, residents spend the equivalent of 7.6 percent of their income for state government. They pay for 56 percent of $5.2 billion worth of government. There’s no corporate or individual income tax, but the state recoups $1.53 for every dollar the residents pay in federal taxes. As of publication, state and local taxes are dropping, from 10.4 percent in 1977 to 9.1 in 2012.

No. 4 Tennessee

In Tennessee, the residents pay for 63.7 percent of the $48 billion dollar state government though the highest state and local sales taxes in the country, 7 percent. Food is taxed an additional 5.5 percent. The balance is paid by visitors to the state. There is no state income tax and no state property tax.

No. 5 Wyoming

Residents spend 7.8 percent of their incomes to pay for 29.9 percent of the $9.3 billion cost of Wyoming’s government. The balance of the bill is paid by oil, coal and mineral concerns in corporate taxes. While there is no state income tax, residents pay a 5.38 percent state sales tax.

No. 6 Texas

Taxes in Texas equal only 7.9 percent of residents’ income. Texans pay no personal income tax, and the Texas sales tax rate of 7.39 percent is the 11th lowest in the nation. It's population is 30 percent larger than that of the state of New York, but its state government costs $196.5 billion, unlike New York, where residents paid 12.1 percent of their income for $243.9 billion worth of government in 2011.

No. 7 New Hampshire

New Hampshire residents pay 8 percent of their income for state taxes. There’s a flat 5 percent tax on dividends and interest statewide, but there’s no ordinary income tax. New Hampshire also has no sales tax -- one of only five states -- but has the highest state property taxes in the country.

No. 8 South Carolina

South Carolina residents shell out 8.1 percent per resident for their state government. They have some compensations, though, in the form of the fifth-lowest gas tax in the nation and low state and local property taxes.

No. 9 Louisiana

Louisiana recoups $1.78 for each dollar paid out in federal taxes. The $44.2 billion dollar cost of Louisiana’s state government also costs residents 8.2 percent of their income from sales and income taxes. These costs, according to the Tax Foundation, are offset by low property taxes.

No. 10 New Mexico

New Mexico’s residents pay 8.4 percent of their income -- $2,027, in 2011, the lowest per capita cost in the country. This pays 59 percent of their $16.9 billion tax bill. Forty-one percent of the state revenues come from nonresidents.


About the Author

Will Charpentier is a writer who specializes in boating and maritime subjects. A retired ship captain, Charpentier holds a doctorate in applied ocean science and engineering. He is also a certified marine technician and the author of a popular text on writing local history.

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