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States with the Highest (and Lowest) Taxes

The 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.

Also Read: America’s Richest States

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.