9 States With No Income Tax (And What It Costs Them)

Nine US states have no personal income tax, and millions of Americans move to these states every year partly because of it. But no income tax doesn't mean low taxes — it means the revenue comes from somewhere else. Here's the full picture.

The Nine States With No Income Tax

1. Alaska — No income tax and no sales tax. Alaska funds its government primarily through oil and gas revenue. The Alaska Permanent Fund distributes a dividend to every resident each year — typically $1,000–$2,000.

2. Florida — No income tax; relies heavily on sales tax (6% base rate), tourism taxes, and property taxes. Florida's warm climate and zero income tax have made it one of the fastest-growing states in the country, particularly attractive to retirees with large investment income.

3. Nevada — Funds its government primarily through casino gaming taxes, sales taxes, and tourism revenue. Las Vegas and the broader gaming industry generate enough revenue that residents pay no income tax.

4. New Hampshire — No income tax on wages, though it does tax interest and dividend income (a tax that was being phased out). Property taxes in New Hampshire are among the highest in the nation — often the trade-off.

5. South Dakota — No income tax; relies on sales taxes and property taxes. Home to several large financial institutions because of its favorable banking laws.

6. Tennessee — Tennessee eliminated its Hall income tax (which taxed investment income) in 2021. Now fully income-tax-free. Combined with low cost of living, Nashville has become one of the country's fastest-growing metros.

7. Texas — No income tax; funds government through one of the highest property tax rates in the country. Texas homeowners often pay 2–2.5% of home value per year in property taxes — significantly higher than California's 0.75% average.

8. Washington — No income tax; relies on a high sales tax (combined state and local rates often exceed 10%) and a Business and Occupation Tax paid by companies.

9. Wyoming — No income tax; funded by mineral extraction taxes (coal, oil, gas) and a relatively modest budget due to the state's small population.

What's the Trade-Off?

No state actually has "no taxes" — the revenue comes from somewhere.

- Higher sales taxes: Nevada, Washington, Tennessee, and Texas all have sales tax rates at or above 9% when local taxes are included. Sales taxes are regressive — lower-income residents pay a higher share of their income in sales taxes than high-income residents.

- Higher property taxes: Texas and New Hampshire have some of the highest property tax rates in the nation. Texas homeowners pay some of the highest property taxes in the country, which partially offsets the income tax advantage — especially for homeowners.

- Resource extraction: Alaska and Wyoming depend heavily on natural resource revenue, which fluctuates with commodity prices and is finite.

- Lower public services: Some no-income-tax states consistently rank lower in education funding, healthcare, and infrastructure spending. There's a correlation (not always causal) between high-income-tax states and higher-ranked public school systems.

Who Benefits Most?

Zero income taxes benefit high earners disproportionately. Someone earning $1 million per year in California pays a top marginal rate of 13.3% — roughly $133,000 in state income taxes. Moving to Texas saves nearly that entire amount. But someone earning $40,000 might find that higher sales and property taxes in Texas fully offset the income tax savings compared to a moderate-income-tax state.

The Migration Trend

No-income-tax states have seen consistent population inflows from high-income-tax states. California, New York, Illinois, and New Jersey all rank among the top states for outmigration. Florida, Texas, and Tennessee rank among the top destinations. The IRS publishes annual data on income migration between states — Texas and Florida consistently show the largest net income inflows.

For high earners, no income tax is a compelling financial argument. For middle and lower-income households, the full tax picture — sales taxes, property taxes, and public service quality — matters just as much.