States With the Highest and Lowest Taxes

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5. Texas
> Taxes paid as pct. of income: 7.6%
> Income per capita: $46,274 (25th highest)
> State income tax collections per capita: None
> Property tax collections per capita: $1,731 (13th highest)
> General sales tax collections per capita: $1,151 (5th highest)

Texas is one of only a few states with no income tax. Instead, the state and local governments rely more on property and sales tax. Property taxes account for 42.0% of state and local revenue, and sales taxes accounts for 36.3%, well above the averages across all states of 31.1% and 23.5%, respectively.

With large oil and natural gas deposits, Texas is the largest energy producer among states, and taxes on resource extraction are a boon for state coffers. The state collects a 4.6% business tax on oil and a 7.0% tax on natural gas. Oil and gas production accounted for some $3 billion in state revenue in 2017 alone.

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4. Tennessee
> Taxes paid as pct. of income: 7.3%
> Income per capita: $43,326 (18th lowest)
> State income tax collections per capita: $49 (8th lowest)
> Property tax collections per capita: $863 (7th lowest)
> General sales tax collections per capita: $1,054 (13th highest)

State and local governments in Tennessee collected the equivalent of $3,268 in taxes in fiscal 2015, the second lowest per-capita tax revenue figure of any state. As is often the case in states with low taxes, Tennessee relies heavily on sales tax revenue to meet budget obligations. Some 40.7% of state and local revenue in fiscal 2015 came from sales taxes, the second highest proportion of any state. Strong sales tax revenue is partially attributable to Tennessee’s 7% sales tax, the second highest sales tax of any state.

A fiscally conservative state, Tennessee not only levies low taxes, but also borrows little. The state’s per capita debt of $913 is the lowest of any state in the country.

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3. Wyoming
> Taxes paid as pct. of income: 7.1%
> Income per capita: $55,116 (9th highest)
> State income tax collections per capita: None
> Property tax collections per capita: $2,347 (6th highest)
> General sales tax collections per capita: $1,097 (11th highest)

Wyoming’s tax code is far less burdensome for the typical resident than that of nearly every other state. Accounting for about 40% of all U.S. coal production, Wyoming is the nation’s largest coal producer. Coal production is not just a boon for the economy, but also to state and local government coffers. Resource extraction accounted for over $2.1 billion in tax revenue in 2016.

Due in part to taxes on the states natural resources, Wyoming can meet budgetary obligations with no revenue from income tax. Wyoming is one of several resource-rich states, including Alaska and Texas, that levies no income tax. Consumers in Wyoming also catch a tax break on certain products, as the state levies no taxes on wine or spirits and has the lowest excise tax on beer of any state.

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2. South Dakota
> Taxes paid as pct. of income: 7.1%
> Income per capita: $47,834 (22nd highest)
> State income tax collections per capita: $00 ()
> Property tax collections per capita: $1,381 (24th lowest)
> General sales tax collections per capita: $1,124 (6th highest)

South Dakota is one of only a few states with no corporate or personal income tax. Consequently, state and local governments in South Dakota depend heavily on sales taxes to meet budgetary obligations. Some 40.5% of the state’s tax revenue comes from sales taxes, the third largest share of any state. South Dakota collected $2,028 per capita in taxes in fiscal 2016, one of the lowest population-adjusted tax revenues in the country.

With insufficient tax collections, South Dakota has to borrow to meet budgetary obligations. The state’s debt of $3,828 per capita is higher than in a majority of states.

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1. Alaska
> Taxes paid as pct. of income: 6.5%
> Income per capita: $55,646 (8th highest)
> State income tax collections per capita: None
> Property tax collections per capita: $2,001 (11th highest)
> General sales tax collections per capita: None

Largely because Alaska levies no sales or income tax, the state has the lowest tax burden as a share of income per capita of any state. Because the state has fewer revenue streams, a larger than typical share of Alaska’s budget funding comes from property taxes and corporate income tax. Some 57.2% of state and local revenue came from property taxes in fiscal 2015, and 8.8% came from corporate income tax, respectively, the second and third largest shares among states.

A low tax burden on residents does not mean the state has limited revenue. Alaska has one of the largest proved oil reserves of any state and levies a 35% tax on all oil and gas produced in the state. This contributed to Alaska’s high total revenue per capita of $10,418 in fiscal 2016, the second highest population-adjusted revenue figure of any state.