With the talk of sharp tax increases coming from Washington, Tennesseans received a break from bad news recently when the Tax Foundation announced that the Volunteer State has the third-lowest tax burden in America.
In its annual "State-Local Tax Burden Ranking," the nonpartisan tax research group found that only Alaska and South Dakota residents pay a lower portion of their incomes in combined state and local taxes than do Tennesseans.
The Tax Foundation determined that, thanks to a lack of state income and property taxes, Volunteer State residents shell out a comparatively reasonable 7.7 percent of their income for state and local taxes. That amount is still both more than most Tennesseans would like and more than the government realistically needs to adequately provide appropriate services. Yet, Tennessee residents get off easy compared to some surrounding states.
North Carolina's state and local governments, for example, snag a jarring 9.9 percent of residents' income. Where Tennessee has the third lowest combined state and local tax burden in America, the Tar Heel state has the 34th lowest tax rate. To make matters worse for North Carolinians, in just the past decade, North Carolina has gone from having the 23rd highest combined tax burden to the 17th highest.
As a Tennessean, it's not fun routinely paying more than 9 percent in sales taxes on most items, but it sure beats shelling out the hefty state property and income taxes faced by our neighbors to the east.
If you're doing Christmas shopping, Georgia is the place to do it. The state has a general sales tax rate of just 4 percent. Further, local governments are limited in what they can add to that rate. On the flip side, what it loses in sales tax revenue Georgia makes up for in its hefty individual tax. Overall, Georgia comes in with the 18th lowest combined state and local tax burden in America at 9 percent.
Alabama ranked solidly in the top-10 least-taxed states in the Tax Foundations' ranking of state and local tax burden, coming in eighth-lowest overall. With no state property tax and a relatively low income tax, Alabama residents pay an average of 8.2 percent of their income in local taxes.
Regardless of what new federal taxes may be slapped on Americans on Jan. 1, it's important to remember that state tax rates can vary greatly and make a significant impact in how much of our paychecks we get to bring home. Tennessee's state and local leaders clearly understand this fact and allow Tennesseans to keep a lot more of their hard-earned dollars than residents of most other states.