Which State has the Lowest State Income Tax

Paying the lowest state income tax enables one to save a considerable amount of money every year. It has been estimated that the average United States citizen spends more on taxes in a single year than on housing, food and clothing combined. Moving to a state with low state income taxes can enable one to save up money for the future.

There are in fact seven states that do not charge state income tax. These are Alaska, Texas, Florida, Nevada, South Dakota, Washington and Wyoming. No matter how much money a person makes in any of these states, he or she will not be charged state income taxes. When one considers that other states charge between one and ten percent of a person’s income for state income taxes, it becomes apparent that a person who does not have to shell out money for income taxes will save thousands of dollars every year.

Considering Other Types of Taxes

A state with the lowest state income tax (i.e. no state income tax) can be a good place to live. However, one should also consider the many other forms of taxes that can reduce a person’s income. Sales tax, properly tax, fuel tax and cigarette tax can cut into one’s income and savings. States with the lowest state income tax do not necessarily have low taxes all around.

Of the seven states listed above, only Alaska does not charge a sales tax. Other states that do not charge a sales tax are Montana, Delaware, New Hampshire and Oregon. Washington and Texas do not charge income tax but they do charge a sales tax of over six percent. Their sales tax rates are in fact some of the highest in the nation. Washington also charges a high cigarette tax. Property taxes are determined on a county level as opposed to a state level, while a fuel tax is charged in all states, across the board.


Choosing a State with a Low Tax Burden

A state with the lowest state income tax will not necessarily be the cheapest place to retire to. One has to consider the other taxes mentioned above as well. A state’s “tax burden” is the full amount of taxes that it will charge. States with a low tax burden have the lowest overall tax rate, even if one or two types of taxes are high. The three states with the lowest tax burden are Alaska, New Hampshire and Tennessee.

Some states with the lowest state income tax are good places to live; others are quite expensive. When choosing where to live, one should consider the overall tax burden of the state. By choosing a state with a low overall tax burden, one will save a lot of money.


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