Cities with the Lowest Tax Burdens
10. Las Vegas, Nev.
> Taxes for family earning $25,000: $3,027 (24th highest)
> Taxes for family earning $150,000: $6,305 (3rd lowest)
> Unemployment rate: 10.2% (9th highest)
Las Vegas had no state or local income tax in 2011, which saved a hypothetical family of three earning $25,000 a year $266 over the average city, and a family earning $150,000 per year an estimated $6,835. Also, the city’s effective residential property tax rate was just $1.15 per $100 of assessed value, a rate lower than most of the cities reviewed. Although the city had an especially high 7.75% sales tax, it also had one of the nation’s lowest sales tax burdens. Among the reasons why, in Nevada only 37.4% of goods are taxed at sale, and food and other consumer goods are exempted. Currently state and local sales tax payments are also tax deductible in Nevada.
9. Manchester, N.H.
> Taxes for family earning $25,000: $2,357 (4th lowest)
> Taxes for family earning $150,000: $6,582 (7th lowest)
> Unemployment rate: 6.0% (16th lowest)
Manchester was one of just five cities reviewed with no state or local sales tax. Additionally, neither the city nor state had an income tax on personal wages, with state income taxes limited to sources such as interest and dividend payments, inheritance and business profits. However, the city is heavily dependent on property taxes, which its website describes as “the principal tax of the City.” In 2011, for a hypothetical family of three, Manchester’s property tax burden was among the highest for all cities observed at all levels of income. Property taxes also comprised the majority of any family’s state and local tax burden: A Manchester family earning $75,000 would have paid $5,134 in state and local taxes in 2011. Of this, $4,645 would have been property taxes.
8. Sioux Falls, S.D.
> Taxes for family earning $25,000: $2,565 (7th lowest)
> Taxes for family earning $150,000: $7,127 (8th lowest)
> Unemployment rate: 4.2% (4th lowest)
Sioux Falls residents benefit from lower than average taxes. Helping to significantly alleviate the total tax burden, Sioux Falls is one of just a few cities where residents are not required to pay any income taxes. In addition, auto taxes are among the lowest of all cities. The one downside for taxpayers is the sales tax burden, which is among the top third of all cities measured. The unemployment rate of 4.2% as of December 2012 was the fourth lowest of all cities measures. The surplus in the city’s 2013 budget is expected to be about $1.7 million.
7. Memphis, Tenn.
> Taxes for family earning $25,000: $2,941 (23rd lowest)
> Taxes for family earning $150,000: $6,450 (5th lowest)
> Unemployment rate: 9.8% (11th highest)
Memphis charged no city-level personal income tax in 2011. Neither did the state of Tennessee, where only income from dividends or interest payments, as well as corporate income, are taxed. However, residents did pay a total of 9.25 cents per dollar in sales taxes, higher than all but three other cities. All of these cities have higher incomes than Memphis, where more than 27% of the population lives below the poverty level, compared with 15.9% nationwide. Partly because of sales taxes, a hypothetical family earning $25,000 paid 11.8% of its income in state and local taxes, while a family earning $150,000 paid just 4.3%.
6. Billings, Mont.
> Taxes for family earning $25,000: $2,223 (the lowest)
> Taxes for family earning $150,000: $11,036 (14th lowest)
> Unemployment rate: 4.1% (3rd lowest)
In 2011, residents of Billings did not have to pay any sales tax, either to the city or their state. Sales taxes cost a family of three earning $25,000 a year $728 and a family earning $150,000 a year $2,194. Additionally, Montana is a low income tax state. At all income levels, Billings had a lower income tax burden than all observed cities where such a tax was in effect. However, not all taxes in Billings were low; gas taxes were more than four cents per gallon higher than the nationwide average in 2011. The state also provides oil and gas companies with a controversial tax holiday, which allows production at new wells to be taxed at a rate of less than 1% during their first 12 to 18 months of operations.