9 Badass States Without State Income Taxes (and How They Get Away with It)

As the federal tax filing deadline looms closer and closer, many people are starting their federal tax returns.

For most, a state income tax return is due as well.

Most states have a personal state income tax. But even the few that don’t impose a state income tax, often have other ways of making up that revenue. 

States Without State Income Taxes

Here is a list of states that do not impose income taxes: AlaskaFloridaNevada, New HampshireSouth DakotaTennesseeTexasWashington, and Wyoming.

How States with No Income Tax Generate Income

Now, before you decide to go rushing off and move to a state that does not levy an income tax, take a quick look at these statistics:

  • Tennessee has yet to pass legislation that would require individuals to pay a state income tax, however Tennessee does require its citizens to pay taxes on dividend and interest income. In addition, Tennessee charges a higher state sales tax to compensate for the loss of revenue.
  • Alaska has neither an individual state income tax nor a state sales tax. Rather, it charges a state corporate income tax instead. And local areas often charge a sales tax. 
  • Neither Nevada nor Texas has either a personal or corporate income tax provision. Instead, Nevada earns the majority of its revenue through the gaming industry and sales tax while Texas relies heavily on franchise taxes and property taxes.
  • Like Tennessee, New Hampshire has instituted a tax on interest and dividends; however there is no sales tax. Property taxes are also high. 
  • Wyoming has neither a personal income taxes nor corporate income taxes. Property taxes and sales taxes are also low. 
  • Florida utilizes proceeds from state sales tax and corporate income tax to offset lost revenue.

As you can see, states that do not require its citizens to pay state income taxes often still collect revenues from the citizenry, just through different means.

These means can be via sales tax, corporate income tax, property tax, tangible and intangible personal property tax and more.

For example, the state of Tennessee does not require individuals to pay a state income tax, however it charges its residents the highest state sales tax levied within the United States, coming in as high as 9.44% in combined state and local sales tax rates.

In addition, this tax is levied on all items sold retail including groceries. It’s no wonder that the state hosts two sales-tax-free events every year!

Other states that prefer not to charge income taxes choose to levy higher rates against local businesses instead of asking their citizens to shoulder the revenue burden.

While this tactic makes sense from a revenue generation perspective, many companies find the higher cost of operations in these states reason enough to look elsewhere to put down roots.

So, in the end, you have to decide whether paying a state income tax is more beneficial to you overpaying a higher sales tax rate.

The good news is that sales tax can be deducted from your federal tax return, which can net you a nice little refund if you itemize!

US States Without a State Tax

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About Philip Taylor, CPA

Philip Taylor, aka "PT", is a CPA, blogger, podcaster, husband, and father of three. PT is also the founder and CEO of the personal finance industry conference and trade show, FinCon.

He created Part-Time Money® back in 2007 to share his advice on money, hold himself accountable (while paying off over $75k in debt), and to meet others passionate about moving toward financial independence.

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  1. TheDreadedWoodenSpoon says

    molocol5 No sales tax on goods. I’ve paid a food tax at Dunkin Donuts though.

  2. @Debbie M Yeah, you probably should let those people go to live their lives free to rob and rape and save a few bucks. News flash, no State in the U.S. has great schooling. Out education system is ran by the Teacher Union mafia.

  3. How about New Hampshire? Is there really No tax at all in this state?

  4. LovelyLazonia says

    In Louisiana, we pay taxes on just about anything and everything.. Dont see how the money is spent because we have some of the worst roads, and education system sucks!

  5. But most people’s income (earnings) goes down when they retire, and more of their money comes from dividends and interest. I’d rather live in one while I’m employed.

    I’m in Texas, and we also get a lot of our revenue from property taxes. And we also just have fewer services than other states–our roads are good, but overall health care and K-12 education is not that great, plus we blow a lot more money on sticking people in prison than other states do.

  6. Good point, Sam. I guess Florida does have that as an extra incentive.

  7. No brainer to retire in one of those states! Hard to find great jobs during though.