5 States Where the Top 1% Pay the Least in Taxes
Written by
Crystal Mayer
Edited by
Zuri Anderson
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
According to a new study by SmartAsset the top 1% of households in the U.S. earn approximately 19.5% of the total income but pay around 37% of the total income taxes. Not all states, however, are created equal when it comes to the share of income taxes that high earners contribute.
In states like Wyoming, Florida and Nevada the top 1% pay over 50% of all income tax revenue. On the other end of the spectrum, the share of income tax paid by top earners is less than one-third. Here are the five states where the top 1% pay the least in taxes, per SmartAsset.
Alaska
In Alaska, the top 1% pays around 26% of the total income taxes for the state, the lowest in the nation. According to the study, elite earners consist of 3,223 households with an average adjusted gross income (AGI) of $1,252,711.
According to U.S. News & World Report, the cost of living is higher compared to the national average and there is no state income tax. Many cities in the state also do not have a sales tax. While the state is the largest in the nation, only a small portion of its land mass is subject to property tax.
West Virginia
Ranking second on the list for states where the top 1% pays the smallest share of taxes is West Virginia. The SmartAsset study found that elite earners cover slightly over 30% of total income tax.
The top 1%, which consists of 7,316 households, earns approximately 13% of the total income and has an effective tax rate of just under 25%. Unlike Alaska, West Virginia has state income tax, but residents of The Mountain State were treated to a 2% personal income tax rate reduction, according to WOWK 13 News.
Oregon
In Oregon, the top 1% of households pays for slightly over 30% of income taxes in the state. The top earners, which includes 19,053 households, contribute a total of over $6 billion in income tax to the Beaver State. These earners account for 15.6% of the total income and have an effective tax rate of 25.85%.
Delaware
The fourth state where the top 1% pays the least in taxes is Delaware. The study found that their share of earned income was 15.2% but they paid for just over 30% of income taxes. The top 1% in Delaware consists of 4,726 households with an average AGI of $1,362,040. Taxes go to pay for things like infrastructure, education, healthcare and welfare programs.
Maryland
Rounding out the top five states where the top 1% pay the least in taxes was Maryland. According to the study, elite earners in the state cover approximately 30% of income taxes.
The 29,040 households that make up the top 1% have an average effective tax rate of 26.5%, well below the 37% set by the IRS for individuals earning $609,351. The average AGI of the top 1% in Maryland is $1,647,004. Their share of earned income in the state is just over 16% and they contribute over $12 billion in income tax.
More From GOBankingRates
