In this article, we will discuss the 15 states with the lowest tax burden in the US. Insider Monkey recently analyzed and listed the 16 states with income tax cuts in 2024.
States with the Lowest Tax Burden
State taxes in the US vary from state to state, unlike the federal tax rate which remains constant across the country. According to the Internal Revenue System (IRS), the top marginal federal income tax rate remains unchanged at 37% for 2024. The other six federal income tax rates are 10%, 12%, 22%, 24%, 32%, and 35 %. Usually, state income tax returns are due at the same time as federal income tax returns on April 15. However, some states may have different deadlines.
Typically, states with the lowest tax burden are the states with no income tax or low income tax. The main reason is that income tax comprises a large percentage of taxes in the majority of states compared to sales and property taxes. According to the Treasury Government Fiscal Data, the US income taxes have accounted for almost 53% of the government revenue so far in the fiscal year 2024. Whereas, the combined individual and corporate income taxes have added $1.85 trillion to the US government revenue, making up 62% of total revenue in FYTD 2024.
There are eight states in the US with no individual income tax including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. While, Delaware, Montana, New Hampshire, Oregon, and Alaska are the five states with no sales tax. Technically, Alaska does not have a state sales tax, however, certain vicinities may impose their own taxes which may average a combined rate of around 1.76%. In addition, property tax rates in the majority of the states are low. Hawaii and Alabama are the states with the lowest property taxes in the US at 0.32% and 0.40%. Other states, including Colorado, Louisiana, and Wyoming, have low property taxes at 0.55%, 0.56%, and 0.56%, respectively. On April 4, ATTOM Data Solutions, a real estate and property data curator, released a report highlighting the property tax data for single-family homes in the US. In 2023, almost $363.3 billion in property taxes were paid by single-family homes, as per the report. This shows a notable rise of 6.9% in property taxes levied in 2022. In addition, this marks the highest increase in property taxes in the past five years in the US. The average single-family homeowner paid around $4,062 in property taxes in 2023, almost 4.1% more than in 2022.
According to a report by the Tax Foundation, 34 states have gone through notable tax changes in 2024, including 17 states cutting individual or corporate income taxes. States including Arkansas, Georgia, Indiana, Iowa, Kentucky, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Carolina, Ohio, and South Carolina have lowered their individual income taxes. The new personal income tax rates for these states are 4.40%, 5.49%, 3.05%, 5.70%, 4%, 4.70%, 4.80%, 5.90%, 5.84%, 3%, 4.50%, 3.50%, and 6.40%, respectively. Connecticut has also reduced its income tax for certain brackets but the top personal income tax remains the same at 6.99%. Five states have provided some form of relief for both business property and homeowners. Colorado has provided temporary relief on property tax, while Indiana and Pennsylvania have increased property tax rebates and income thresholds, respectively.
Tax Service Provides in the US
According to a report by IBISWorld, the tax service market revenue in the US reached around $13.9 billion in 2023, growing at a compound annual growth rate of 3.2% over the past five years. Tax service providers are key players in addressing the challenges faced by the US tax systems by offering innovative products and services. Some of the leading tax service providers in the US include CBIZ, Inc. (NYSE:CBZ), H&R Block, Inc. (NYSE:HRB), and RSM US LLP.
CBIZ, Inc. (NYSE:CBZ) is one of the top tax service providers and accounting and advisory services firms. On April 25, CBIZ, Inc. (NYSE:CBZ) announced the earnings for the first quarter of 2024. CBIZ, Inc. (NYSE:CBZ) posted earnings per share of $1.54, beating consensus estimates by $0.04. The company reported a revenue of almost $494.30 million, surpassing estimates by $3.42 million. Here are some of the comments from the company’s Q1 2024 earnings call:
“We are pleased to report that we’re off to a strong start to the year. For the first quarter, total revenue was up 8.7% with growth coming from every major service line across our two business divisions. Our performance for the quarter came in as expected. And reflects continued strong demand for our services and the optimism and resilience of the clients that we serve. Now turning to the performance of our two major divisions. Our Financial Services division demonstrated growth across each of its three major service groups, accounting and tax, advisory and government health care consulting. For our Tax & Accounting business, client demand for these essential and recurring services remains high and our results include our continued success in capturing increased pricing to reflect the value of the services that we provide to our clients.”
RSM US LLP is one of the top assurance, tax, and consulting services providers for the middle market. On May 13, RSM US LLP announced that the 2023 RSM Classic, a golf tournament on the PGA Tour, raised around $5.74 million and donated to children and family-focused charitable organizations. All the charity amount raised through The RSM Classic is distributed by the RSM US Foundation and the Davis Love Foundation. On April 23, RSM US LLP reported that it was named one of America’s ‘Best Employers for Diversity 2024’ by Forbes for adopting and celebrating diversity.
H&R Block, Inc. (NYSE:HRB) is another industry leader and a top tax service provider in the US. On May 9, H&R Block, Inc. (NYSE:HRB) reported its earnings for the third quarter of 2024. The company posted earnings per share of $4.94, surpassing consensus estimates by $0.33. The revenue came in at around $2.18 billion, beating estimates by $47.37 million. Here are some of the comments from H&R Block, Inc.’s (NYSE:HRB) Q3 2024 earnings call:
“Beginning with Q3 results ending March 31, revenue grew 4%, EBITDA grew 6% and EPS grew 18%. In the quarter, performance was driven by improvements in net average charge or NAC in both assisted and DIY. DIY volume growth and ongoing disciplined expense management, based on how we ended tax season and our third quarter performance, we now expect to finish the year near the high end of our outlook.”
Tax providers offer a wide range of services from consultation to tax filing through their online services and special consultants. With this context, let’s take a look at the 15 states with the lowest tax burden in the US.
Marco Rubino/Shutterstock.com
Our Methodology
To compile our list of the 15 states with the lowest tax burden in the US, we gathered tax rates data from the Tax Foundation. We have considered the top personal income tax, sales tax, and property tax rates for each state, as of 2024. We have calculated the tax burden of each state by adding all the taxes and finding the total taxes paid against the average individual income of the state. We have ranked states in ascending order of their tax burden. The data for average individual income for each state was taken from Forbes.
15 States with the Lowest Tax Burden in the US
15. Arizona
State Tax Burden: 9.13%
Income Tax: 2.50%
Sales Tax: 6%
Property Tax: 0.63%
Arizona has a flat income tax rate of 2.50% and a sales tax of 6%, as of 2024. With a state tax burden of 9.13%, Arizona ranks 15th among the states with the lowest tax burden in the US.
14. North Dakota
State Tax Burden: 8.88%
Income Tax: 2.90%
Sales Tax: 5%
Property Tax: 0.98%
North Dakota has a graduated personal income tax rate ranging from 1.10% to 2.90%. North Dakota has a sales tax of 5% and a property tax of 0.98%.
13. Louisiana
State Tax Burden: 8.81%
Income Tax: 4.25%
Sales Tax: 4%
Property Tax: 0.56%
Louisiana is one of the states with the lowest tax burden in the US. Louisiana has income tax rates ranging from 1.85% to 4.25%. Louisiana’s property tax rate is 0.56% and the sales tax rate is 4%.
12. Colorado
State Tax Burden: 7.95%
Income Tax: 4.40%
Sales Tax: 2.90%
Property Tax: 0.55%
Colorado has a flat income tax rate of 4.40% and a sales tax of 2.90%. Colorado has a tax burden of just under 8% and ranks 12th among the states with the lowest tax burden in the US.
11. Washington
State Tax Burden: 7.87%
Income Tax: 0%
Sales Tax: 7%
Property Tax: 0.87%
Washington does not have a traditional income tax rate but levies a 7% tax on capital income gains. The state has a 7% sales tax and a 0.87% property tax paid as a percentage of owner-occupied housing value.
10. Texas
State Tax Burden: 7.68%
Income Tax: 0%
Sales Tax: 6.25%
Property Tax: 1.68%
Texas is one of the states with no income tax. Texas has a sales tax of 6.25% and a property tax of 1.68%. Texas ranks 10th among the states with the lowest tax burden in the US.
9. Tennessee
State Tax Burden: 7.67%
Income Tax: 0%
Sales Tax: 7%
Property Tax: 0.67%
Tennessee has no income tax and has a 0.67% property tax for single homeowners. Tennessee has a state tax burden of 7.67%.
8. Nevada
State Tax Burden: 7.59%
Income Tax: 0%
Sales Tax: 7%
Property Tax: 0.59%
Nevada has a low property tax rate of 0.59% and no income tax. Nevada has a tax burden of 7.59% and ranks eighth among the states with the lowest tax burden in the US.
7. Delaware
State Tax Burden: 7.21%
Income Tax: 6.60%
Sales Tax: 0%
Property Tax: 0.61%
Delaware has graduated personal income tax, ranging from 2.20% to 6.60%. Delaware has no sales tax and a 0.61% tax on property.
6. Florida
State Tax Burden: 6.91%
Income Tax: 0%
Sales Tax: 6%
Property Tax: 0.91%
Florida ranks sixth among the states with the lowest tax burden in the US. Florida has no income tax and a low property tax of 0.91%.
5. Montana
State Tax Burden: 6.64%
Income Tax: 5.90%
Sales Tax: 0%
Property Tax: 0.74%
Montana has zero sales tax and 0.74% property tax. Montana has a graduated personal income tax, ranging from 1% to 5.90%.