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Which states have the lowest taxes?

Alaska and Tennessee had the smallest tax burdens in 2020.

by USAFacts Team

How do state tax burdens stack up?

Americans’ tax burdens — the amount of taxes paid by a person represented as a proportion of their income — vary by state. Some states impose annual income taxes, while others don’t but charge relatively high sales taxes instead. Layered onto that are property taxes, license taxes, corporate income taxes, and more.

Here’s an exploration of state and local[1] tax revenue as a percentage of personal income that accounts for the differences in average incomes nationwide.[2] The percentage of personal income is calculated by dividing the per capita tax revenue by the per capita annual income for each state. It's worth noting that this differs from the tax rate, which is a percentage of each dollar that the state or local governments garnish for a given tax category.

2020 tax burden by state

Tax revenue as a percent of personal income in each state

Individual income

There are seven states — Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming — without income taxes.

A bar chart showing tax revenue as a percent of personal income in each state. The US average is 2.1%, the max is in New York at 4.7%, and there are 7 states without personal income tax. Additional information will be added to this same chart.

Conversely, New York and Maryland collected income taxes that amounted to more than 4% of personal income in 2020.

A bar chart showing tax revenue as a percent of personal income in each state. The US average is 2.1%, both Maryland (the second highest at 4%) and New York (the highest at 4.7%) are highlighted.

One way states offset low or no income taxes is with property taxes.

A stacked bar chart showing tax revenue as a percent of individual income and property tax in each state. The US average is 5.2% total and 3% property tax. The max is in New York at 9.1% total and 4.4% property tax.

Every state collects property taxes. However, states without income taxes don’t necessarily have higher property taxes. Tennessee, for example, has almost no income tax and had 2020’s lowest property taxes as a percentage of personal income.

A stacked bar chart showing tax revenue as a percent of individual income and property tax in each state. The US average is 5.2% total and 3% property tax. The smallest is Tennessee at 1.6% property tax and no individual income tax.

Many states offset low property and income taxes with higher sales taxes. Sales taxes in this visualization include both generic taxes on most purchased goods and selective sales taxes on specific items such as gas, alcohol, tobacco, and public utilities.

A stacked bar chart showing tax revenue as a percent of individual income, property, and sales tax in each state. The US average is 8.5% total and 3.3% sales tax. The max is in New York at 12.4% total and 3.4% property tax and the smallest is Alaska at 5.1% total and 1.5% sales tax.

Tennessee, Nevada, and Washington have similar tax profiles: no income taxes and below-average property taxes that are partly made up for by higher sales taxes.

A stacked bar chart showing tax revenue as a percent of individual income, property, and sales tax in each state. Tennessee (3rd lowest, 6% total), Nevada (19th, 7.5% total), and Washington (25th, 8.1% total) are highlighted.

Remember that these charts show tax revenue as a percentage of personal income. Hawaii, for example, has a lot of tourists who pay sales tax. Its sales tax burdens are exported to other states.

A stacked bar chart showing tax revenue as a percent of individual income, property, and sales tax in each state. Hawaii, second to last, 12.2% total with 6.7% sales tax rate, is highlighted.

The remaining state tax revenues come from various sources, such as vehicle and other license taxes. These usually form a small portion of a state’s tax revenue.

A stacked bar chart showing tax revenue as a percent of individual income, property, sales, and license tax in each state. The US total average is 8.7% with 0.3% from license taxes. The overall highest is Hawaii, 12.8% total with 0.6% license taxes, and the lowest is Alaska with 5.4% total and 0.2% license taxes.

Miscellaneous other taxes are a broad category of commonly smaller taxes such as death taxes, gift taxes, and any other uncategorized taxes. These typically amount to a small percentage of state taxes overall.

A stacked bar chart showing tax revenue as a percent of individual income, with property, sales, license, and other tax in each state. The US total average is 8.9% with 0.2% from other taxes. The overall highest is New York, 13.1% total with 0.4% other taxes, and the lowest is Alaska with 5.4% total with no other taxes.

All the taxes displayed thus far focus on individual taxpayers. However, states also tax businesses in various ways.

The chart is the same as in the previous step.

The most ubiquitous business tax is corporate income tax, usually amounting to less than 1% of personal income. Here, the chart remains sorted by the total individual tax burden (blue tones), with corporate income tax shown alongside.

A stacked bar chart showing tax revenue as a percent of individual income, with property, sales, license, other tax, and corporate income tax in each state. The US total average is 9.2% with 0.3% from corporate income taxes. The overall highest is New York, 13.9% total with 0.8% corporate income taxes, and the lowest is Alaska with 5.7% total and 0.4% corporate income taxes.

States impose severance taxes on natural resource extractions such as mining or oil and gas drilling. These taxes comprise a larger percentage of revenue in states with significant natural resource extraction, such as North Dakota, New Mexico, Wyoming, and Alaska.

A stacked bar chart showing tax revenue as a percent of personal income, with individual income, property, sales, license, other tax, corporate income, and severance tax in each state. The US total average is 9.2% with 0.06% from severance taxes. Four states are highlighted: Alaska (smallest total tax burden at 7% and 1.3% from severance taxes), Wyoming (4th lowest, 8% total, 1.3% severance taxes), North Dakota (13th, 12.2% total and 4.4% severance taxes), and New Mexico (37th, 10.6% total and 1.4% severance).

Business license taxes are usually a small fraction of a state’s tax revenue. One exception is Delaware, which has a flexible legal environment for corporations and low corporate income tax. As a result, most US businesses were registered in Delaware in 2020, and the state collected business license taxes equivalent to 3.2% of personal income.

A stacked bar chart showing tax revenue as a percent of personal income, with individual income, property, sales, license, other tax, corporate income, severance tax and business license tax in each state. The US total average is now 9.4% with 0.2% from business license taxes. One state is highlighted: Delaware, 6th lowest total tax burden, 10.4% total and 3.2% business license taxes, the largest business license tax out of all 50 states.

So far, tax burdens have been displayed as a percentage of the personal income in each state to normalize average income differences between states.

A stacked bar chart showing tax revenue as a percent of personal income, with individual income, property, sales, license, other tax in each state. The US total average is now 9.4% with 0.2% from business license taxes. No states are highlighted.

New Hampshire has the second-lowest burden when ranking states by taxes as a percentage of personal income. The small burden is a result of the state having higher than average incomes in a relatively small population (the 11th smallest population in 2020).

A stacked bar chart showing tax revenue as a percent of personal income, with individual income, property, sales, license, other tax in each state. New Hampshire is highlighted with a total tax burden of 6.4% of personal income, and ranks second in terms of lowest tax burden (Tennessee ranks first).

But those high personal incomes really impact the ranking, so here’s a different way of measuring individual tax rates. Ranking states by taxes per person removes the effect of personal income in each state. When measured this way, New Hampshire's tax burden rank increases to 24th in the nation.

A stacked bar chart showing tax revenue in per capita tax revenue, measured in dollars, with individual income, property, sales, license, other tax in each state. New Hampshire is highlighted, this time ranked 24th in terms of lowest tax burden, with a per capita yearly tax burden of $4.4 thousand.

What is my individual tax burden?

Delving deeper into individual tax burdens requires knowing a little bit about each taxpayer. Property taxes are paid most directly by homeowners, although some of the tax may be shifted onto renters. Alcohol and tobacco taxes are only paid by people who purchase those products.

Tax burden also varies by income level. For people with income higher than the state’s per capita income, per capita revenue might yield a more representative estimate of a state’s tax burden.

Taxes like property tax and sales tax depend on a person’s home value and spending habits. There are general sales taxes on most goods and services people might purchase on a daily basis. Selective sales taxes target specific items such as alcohol, tobacco, and motor fuel. Other selective sales taxes include taxes on amusement, betting, and utilities.

Use the chart below to see tax rankings based on different spending categories, including more detailed sales tax sub-categories. Wondering which state has the largest alcohol tax? Find out by toggling off all other taxes.

Which states collect the most taxes per person?

A summary of tax burden wouldn't be complete without a ranking of states by the total tax burden, which includes taxes that target both individuals (blue tones) and businesses (green tones). This view highlights states like Delaware and North Dakota where overall tax burdens may be relatively high, but the burden has been shifted from people to businesses.

2020 tax burden including business taxes

Per capita tax revenue (dollars)

Individual income

Property

Sales

License

Other

Corporate income

Severance

Business license

Get the data Download image

Which states depend the most on taxes?

While some states have relatively low tax burdens for individuals, most derive approximately half of their budgets from state and local taxes. The remaining half comes from charge revenue, miscellaneous income, and the federal government. Charge revenues are derived from services that state governments charge direct fees for: hospitals, school tuition, sewerage, highway tolls, and smaller services like parks and recreation. Miscellaneous revenues come from interest earnings, royalties, lottery revenues, and the sale of state property. Federal sources include public welfare programs such as Medicare and Medicaid, K-12 education programs, or other special transfers such as coronavirus relief.

Sorting by decreasing reliance on taxes reveals that many northeast states, along with Illinois, Nevada, Hawaii and Washington D.C., rely most on taxes to fund their governments.

2020 taxes as percent of total state revenue

Percent of total state revenue

Individual income

Property

Sales

License

Other

Corporate income

Severance

Business license

Get the data Download image

Seeing tax burdens as a percentage of personal income cuts through the noise of analyzing tax rates. Of course, it’s only part of the story, which is why it’s important to look at tax burdens on a per-person basis for even more context.

Looking at this data from different angles provides key insights, including the fact that states without income tax don't necessarily have the lowest tax burdens. They make up for it with high taxes on what people buy on or the property they own. Plus, states shift many taxes from residents to visitors and tourists via sales and other taxes. Understanding how your state taxes people and corporations, compared to the services it provides residents, can give a sense of what a state prioritizes.

USAFacts has much more on tax policy, including an explanation of the state and local tax deduction and what the average family pays in taxes.

Sources & Footnotes

  1. [1]

    This article uses the US Census Bureau's methodology of treating state and local governments as single entities. Local level taxes such as property taxes are treated together with state taxes even though taxes were not collected by the state directly.

  2. [2]

    Per capita personal income is different for every state and is sourced from the Bureau of Economic Development. The tax revenues displayed here do not take into account tax exporting between states, or the shifting of taxes between tax categories, such as the shifting of business related taxes onto consumers.