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Fact check: Which states ranked lowest in tax burden in 2025 and who compiled the ranking?
Executive Summary
WalletHub’s April 1, 2025 analysis identifies Alaska as having the lowest overall tax burden in 2025, reporting residents pay roughly 4.93% of their income in state and local taxes; WalletHub compiled and published the ranking [1]. Other organizations such as the Tax Foundation publish complementary metrics—like the State Tax Competitiveness Index—that evaluate the structure and competitiveness of state tax systems rather than producing a straight tax-burden ranking, and those metrics list Alaska among several low-tax states though via different methodology and emphasis [2] [3]. This piece explains the key claims, compares the methodologies and findings across sources, and flags what the different approaches do and do not reveal about which states are truly “lowest taxed” in 2025.
1. What the headlines claim — Alaska tops the low-tax list and WalletHub compiled it
WalletHub’s headline claim is straightforward: Alaska ranks lowest in overall tax burden in 2025, with residents facing a total tax bill equal to about 4.93% of personal income, the lowest across the 50 states; WalletHub built the ranking by aggregating state and local property taxes, individual income taxes, and sales and excise taxes as shares of total personal income [1] [3]. The WalletHub study explicitly states its methodology and date of publication as April 1, 2025, and positions its result as a direct, dollar-share comparison of tax payments to income—a measure of tax burden rather than tax structure [1]. This claim is reiterated in secondary summaries like US News and state-by-state reporting that cite WalletHub’s numbers and ranking presentation [4].
2. How WalletHub measures tax burden — direct shares of income across three tax types
WalletHub’s approach sums three major tax categories—property taxes, individual income taxes, and sales and excise taxes—each measured as a share of total personal income within a state, then aggregates those shares to produce an overall tax-burden percentage [3]. The method’s appeal is clarity: it answers the simple question, “What percent of income goes to these taxes?” But the approach omits corporate taxes, certain local fees, and other revenue streams that can affect overall fiscal burden and taxpayer incidence; it also does not adjust for state services received or cost-of-living differences, meaning the ranking reflects tax payments relative to income but not net fiscal benefit or economic impact [1] [3]. WalletHub’s transparency about the categories used helps users interpret what “lowest tax burden” specifically denotes.
3. The Tax Foundation view — competitiveness and structure, not a direct burden ranking
The Tax Foundation’s State Tax Competitiveness Index takes a different tack: it evaluates how well state tax systems are structured—factors such as rate progressivity, tax base breadth, and complexity—rather than ranking states strictly by share of income paid in taxes [2] [3]. In the 2025 Index, states like Wyoming, South Dakota, and Alaska appear among the top (most competitive) states, reflecting low rates or absence of major taxes, but the Index is designed as a reform roadmap rather than a burden calculator [2]. Because the Foundation’s metrics focus on competitiveness and economic effects, their results complement but do not substitute for WalletHub’s burden numbers; the two sources can lead to similar lists of low-tax states but for analytically different reasons [3] [2].
4. Cross-checks and consistency — where sources align and where they diverge
Across the sources provided, consensus emerges that Alaska is among the lowest-taxed states in 2025, with WalletHub explicitly placing it first by burden share and the Tax Foundation listing it among the most competitive systems [1] [2]. Divergences appear in emphasis and scope: WalletHub gives a single numerical burden percentage and ranks all 50 states on that basis, while the Tax Foundation provides a multi-factor competitiveness ranking without producing a comparable percent-of-income burden figure [1] [3]. Secondary summaries using WalletHub’s data repeat the Alaska-first finding and note other low-burden states like Florida, where absence of a personal income tax contributes to low household tax shares, illustrating agreement on key low-tax examples but differences in interpretation and analytic purpose [4] [1].
5. What policymakers and readers should watch — methodology limits and omitted considerations
The headline that Alaska has the lowest tax burden (4.93%) is supported by WalletHub’s stated method and publication date (April 1, 2025), but readers must weigh important caveats: WalletHub’s measure excludes corporate tax incidence and other state revenue mechanisms, does not account for public service value or cost-of-living, and treats all income uniformly across states; the Tax Foundation’s Index supplies structural context but cannot be read as an identical burden ranking [1] [3] [2]. For policy or relocation decisions, combining WalletHub’s burden percentages with Tax Foundation competitiveness scores and state fiscal context (services, budgets, and economic structure) provides a more complete view than any single ranking alone [5] [3].