Which States Have No Income Tax? State Income Taxes and Affordability

States such as Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming do not levy a state income tax. However, Washington imposes a state capital gains tax on certain high earners, while New Hampshire taxes some dividends and interest. Tennessee recently eliminated its tax on investment income.

Tax Revenue Sources

  • Alaska relies on revenue from mineral lease rentals and royalties.
  • Florida benefits from tourism revenue.
  • Nevada’s economy is powered by the entertainment and hospitality industry.
  • Wyoming generates revenue through property, oil, sales, and excise taxes.

It is worth noting that Texas and New Hampshire have high property taxes, which can affect overall tax burden. Furthermore, Wyoming has the second-lowest tax burden and above-average scores for cost of living and housing affordability.

Overall Tax Burden and Rankings

The following table presents each state’s total tax burden, affordability ranking, and position on the U.S. News & World Report “Best States to Live In” list:

State Tax Burden (%) Tax Rank (1-50) Affordability Rank "Best States" Rank
(State’s Name) (Total Tax %) (Rank) (Affordability) (Rank in Best States)

High-Income Families

For high-income families, living in a state without a personal income tax can result in significant savings. Without the need to pay state income tax, more of their earnings can be retained. Nevertheless, it’s important to consider the entire tax landscape before making a decision to move to a state without income tax.

Tax-Friendly States

  • Most tax-friendly: Wyoming, with its small tax burden and good affordability scores.
  • Lowest taxes overall: Alaska, with no income or sales tax and ranking high for both low taxes and affordability.

In conclusion, when considering relocation, it is essential to take into account all aspects of a state’s tax system, as states without income tax may have higher property, sales, and fuel taxes to compensate for the lack of income tax revenue.

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