Fact check: Which states have the lowest tax burdens in 2025 and what are their primary sources of revenue?

Executive summary — Short answer up front: Alaska emerges repeatedly as the state with the lowest overall state‑and‑local tax burden in 2025, with WalletHub reporting residents pay about 4.93% of income in combined taxes; several states that levy no personal income tax — including Alaska and Florida — also rank among the lowest burdens (WalletHub, April 1, 2025; TurboTax, August 3, 2025) ^{[1] [2]}. The primary revenue sources differ sharply by state: Alaska depends heavily on oil/energy taxes and royalties, while no‑income‑tax states typically lean on sales, tourism receipts, severance and property taxes as revenue substitutes; tax‑competitiveness studies identify Wyoming and South Dakota as structurally low‑tax states by design ^{[1] [3] [2] [4] [5]}.

1. Why Alaska keeps topping “lowest‑tax” lists — the oil anchor that makes the math work

WalletHub’s April 1, 2025 ranking places Alaska at the bottom of household tax burdens, reporting 4.93% of income paid to state and local governments and repeating a familiar theme: Alaska’s public finances are overwhelmingly tied to oil production, taxes and royalties, which local reporting and compilations describe as the dominant revenue engine ^[1]. Other writeups reiterate that energy receipts — direct taxes, production levies and royalties — supply a substantial share of state coffers, and public summaries sometimes quantify that reliance at very high levels ^[3]. That structure produces a low apparent burden for typical residents because resource revenues replace broad‑based individual income levies, but it also creates volatile fiscal exposure when commodity prices fluctuate; several analyses emphasize that the low burden metric reflects revenue composition as much as statutory tax rates ^{[1] [3]}.

2. No‑income‑tax states: the tradeoffs behind “low burden” branding

Multiple sources note that seven states lack a personal income tax in 2025, including Alaska and Florida, which contributes to their rankings among low‑tax states (TurboTax, August 3, 2025; WalletHub) ^{[2] [1]}. States that abandon or avoid income tax typically compensate with higher sales taxes, tourism‑driven levies, property taxes or industry‑specific taxes — creating a different tax mix rather than uniformly lighter public revenue demands. Tax‑competitiveness indexes and consumer‑facing rankings measure burdens differently: some focus on tax as a share of personal income, others on rate structures or business competitiveness. That means a state can score low on household tax burden while still relying on regressive consumption taxes or sectoral levies that shift cost burdens across residents and time ^{[2] [4]}.

3. The Tax Foundation lens: competitiveness vs. household burden

The Tax Foundation’s 2025 State Tax Competitiveness Index emphasizes structural features — corporate taxes, individual income rates, sales and property tax design — and ranks Wyoming and South Dakota near the top for competitiveness ^{[4] [5]}. Those states pair modest statutory rates with narrow administrative friction, which appeals to businesses and economic development arguments; the index is focused on relative distortions and administrative neutrality rather than direct shares of household income consumed by taxes. This produces a different list of “best” states than household‑burden studies: competitiveness measures favor policy stability and broad bases, while burden studies favor states with large non‑tax revenues or no income tax, producing different policy implications for residents and firms ^{[4] [5]}.

4. Conflicting metrics and how they change the narrative about “low tax” states

WalletHub’s household burden ranking, TurboTax’s income‑tax inventory, and the Tax Foundation’s competitiveness index each tell part of the story, but they can point to different states because of methodology: household burden measures use tax payments relative to income; competitiveness evaluates tax codes’ economic effects; and income‑tax listings simply report presence or absence of a tax ^{[1] [2] [4]}. That methodological divergence matters: a state may rank low in household burden because of large resource revenue (Alaska), yet score differently on competitiveness or business appeal. Users must read the metric before adopting the headline: “low tax” can mean low household share, simple tax code, or absence of a specific levy — and each framing serves different stakeholders and policy debates ^{[1] [2] [4]}.

5. Bottom line for policymakers and taxpayers — revenue composition is the decisive factor

The data converge on a practical point: states with the lowest measured tax burdens in 2025 — prominently Alaska, and other no‑income‑tax states like Florida — achieve that status through distinct revenue mixes rather than identical tax policies ^{[1] [2] [3]}. Alaska’s low household burden relies on energy revenues; Florida and similar states substitute consumption, tourism and property receipts for income tax revenue. Evaluations of fiscal sustainability, equity and volatility therefore require looking beyond headline rankings to revenue source concentration, economic exposure (e.g., oil price swings), and who bears consumption versus income taxes in each state ^{[1] [2] [3] [4]}.

Sources: WalletHub ranking and writeups (April 1, 2025), TurboTax income‑tax overview (August 3, 2025), and the Tax Foundation 2025 State Tax Competitiveness materials (p1_s1, ^[2], ^[3], ^[1], ^[4], p2