States with the Lowest Income Tax Rates

Written by: Primerates Staff

According to the Tax Foundation, Americans in 2011 will have the lowest tax obligation since 2007 due mainly to the recession, tax cuts, and the Making Work Pay tax credit.  Seven states with the lowest income tax rates have a marginal income tax of zero:  Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.  The marginal tax rate refers to the maximum statutory tax rate on the last dollar of the tax base or taxable income.

Alaska.  Since 1990, Alaska has had the lowest local and state tax obligation among states with the lowest income tax rates in the United States.  The state has a corporate tax rate that ranges between 1.0 to 9.4 percent.  The state does not have a general sales tax.  The gasoline tax — $0.8 per gallon, ranks the lowest in the country.  The major employers in the state, which has an unemployment rate of 7.7 percent in August, include Carrs/Safeway, Fred Meyer, and ASRC Energy Services.  The state has a median home value of $247,500, tops among states with the lowest income tax rates.

Florida.  Although Florida does not have an individual income tax, it assesses a corporate tax rate of 5.5 percent.  The state has a general sales tax of six percent.  The gasoline tax of $0.34 rates the fifth highest in the country, and among states with the lowest income tax rates.  Walt Disney, Publix Supermarkets, and Universal-Orlando make up state’s largest employers.  Florida has an unemployment rate of 10.7 percent.  Median home value is 179,000.

Nevada.  The state levies a general sales tax of 6.85 percent, which exceeds the national median sales tax of 5.85%.  Nevada also charges a gas tax of $0.33.1 per gallon. Bellagio, Wynn Resorts Holdings, and MGM Grand Hotel & Casino employ the largest number of workers.  The median housing price is $135,000.

South Dakota.  South Dakota assesses a four percent sales tax on goods.  The state also levies a $0.24 per gallon gasoline tax.  Financial institutions pay corporate taxes at a rate of 0.25 to 6.0 percent in South Dakota, one of the states with the lowest income tax rates.  Citigroup, Wells Fargo, and John Morrell & Co. are the three largest employers in the state. South Dakota has an unemployment rate of 4.7 percent.  In August 2011, the median home price increased 0.5 percent, on a year-to-year basis, to $164,900.

Texas.  Consumers pay a general sales tax of 6.25 percent.  The state charges a $0.20 tax on each gallon of gasoline.  Starting January 1, 2007, some businesses started paying a gross receipts tax of 0.5 to one percent.  Retailers must pay 0.5 percent franchise tax.  AT&T, JP Morgan, and H-E-B make up the largest non-retail employers in the state, which has an unemployment rate of 8.5%.  The median home price is $169,000.

Washington.  Washington charges consumers a 6.5% general sales tax.  Along with local and selective sales taxes, the state has the second highest combined local and state general and selective sales tax in the U.S. at $2,661 per individual.  The state also has a $0.37 cent gasoline tax – the third highest in the country.

The unemployment rate reached 9.3 percent in August 2011.  Excluding retail, Boeing, Microsoft, and Fred Meyer employ the most workers.  Zillow reports a median home price of $ 239,000, which represents a 7.7 percent decline from the previous year.

Wyoming.  The state has a general sales tax of four percent.  The $0.14 per gallon gasoline tax ranks as the 48th highest in the U.S.  Xanterra Parks and Resorts, The Industrial, and Elkhorn are the three largest private employers in the state.  Wyoming has an unemployment rate of 5.8 percent.  The median home price is $219,000.


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States with the Lowest Income Tax Rates

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