Alabama ranked 10th with an annual per capita tax of $ 3,147, or 7.37% of income. Georgia was the 14th lowest, with an annual per capita tax of $ 3,678, or 7.84% of income.
Tennessee has one of the lowest state and local tax loads of any state in the country.
A new study by HireHelper that compared taxes in all 50 states found Tennessee ranked second after Alaska in the percentage of personal income individuals pay in state and local real estate, sales, and income taxes. The amount of state and local taxes paid by the typical Tennessean was $ 2,694 in 2018, 44.4% below the national average and the lowest of all states. This is based on data from the US Census Bureau’s most recent annual survey of state and local taxes.
The typical Tennessean paid 5.7% of their income for real estate, sales, and other state and local taxes, compared to a national average of 8.9% of personal income for such taxes. Only Alaska, which in a few years was able to generate up to 70% of its national budget by taxing oil and natural gas production, taxed people on a smaller proportion of their income.
Bill Lee, Tennessee governor, who was elected two years ago on an election promise to keep Tennessee taxes low, said he took pride in being recognized as a low-tax state and insisted that taxes can be kept low while one high level of service is maintained “to Tennessee taxpayers.
“Lower taxes lead to job creation, prosperous communities and more money in the pockets of hardworking Tennesseans,” he said.
The conservative Nashville think tank of the Beacon Group attributes Tennessee’s low tax burden to above-average economic growth in recent years.
“There’s a reason Tennessee is one of the fastest growing states in the country and people are fleeing here from Illinois, New York, California, and other countries,” said Ron Shulis, Beacon’s policy director. “Tennessee’s commitment to low taxes and fair regulations has created a business environment that is attractive to both businesses and workers.”
Countries with the lowest tax burden
1. Alaska 5.04% annual tax rate of $ 3,030 per person
2. Tennessee, 5.7% – Eliminate tax charge of $ 2,694 per person
3. Wyoming, 6.11% – annual tax charge of $ 3,709
4. Delaware, 6.17% – annual tax charge of $ 3,260
5. New Hampshire, 6.83% – annual tax rate of $ 4,192
Source: HireHelper State and Local Tax Burden Study
Alabama ranked 10th with an annual per capita tax of $ 3,147, or 7.37% of income. Georgia was the 14th lowest, with an annual per capita tax of $ 3,678, or 7.84% of income.
Matt and Kelly Rozanski are among those enjoying Tennessee’s lower tax rates after moving from their previous Illinois homes to the Jasper Highlands near Kimball, Tennessee, where they paid more than $ 12,000 in annual property tax bills . With no state income tax and much lower property tax rates than before on their homes in Naperville and Lockport, Illinois, the Rozanski’s only pay part of what they used to pay for state and local taxes.
Others, however, are skeptical that lower taxes inevitably mean higher economic growth
“Maintaining and enhancing state investments in education, health care, roads, bridges, parks, and other infrastructure will do far more to promote inclusive economic growth and the well-being of its residents than will reduce income taxes,” said Michael Mazerov, a Senior Fellow at the Center on Budget and Policy Priorities said in a study of state taxes last year.
Tennessee spends the seventh lowest amount of all 50 states on elementary and secondary education, and the median household income in Tennessee is still 15.2% below the US average
Tennessee is one of nine states that do not tax wage income, and as of January 1, the volunteer state will have the Hall tax on interest and dividend income repetitive in full. The Hall Tax was introduced in 1929 and imposed a 6 percent tax on Tennesseans’ interest and dividend income.
Justin Owen, CEO of the Beacon Center, said with the end of the Hall tax on Friday, “Tennessee is finally getting real income tax free.”
Tennessee is able to avoid state income or payroll taxes by imposing relatively higher sales taxes, in part, on most items, including groceries, and above-average franchise and excise taxes on businesses operating in the state. Tennessee has a statewide sales tax of 7% and allows local governments to pay up to 2.75% more on top of the state levy.
Sales tax is paid in part by visitors who come to the tourist-oriented state, and part of the franchise and excise tax records the revenues that large Tennessee businesses generate.
Bill Fox, director of the Boyd Center for Economic and Economic Research at the University of Tennessee, said the volunteer state has also been recognized for running more efficient state government with less per capita debt than most states. Tennessee was also able to turn to outside funding sources such as the state lottery and a nonprofit support group to help pay for a tuition support program for higher education in Tennessee, Fox said.
“It seems to me that Tennessee does a pretty good job of providing services in a low-tax environment, and it has been known for many years for its budgetary discipline and creativity in facing challenges,” he said. “Among the states in the southeast, we have always been the leader in economic growth among the states that are not on the coast and sometimes even better than the states on the coast.”
Contact Dave Flessner at [email protected] or at 423-757-6340.
Staff photo of Troy Stolt / Governor Bill Lee speaks on a podium in the Cleveland High School library during a visit to Cleveland, Tenn on Thursday, October 29, 2020.