There are seven U.S. states with no income tax, yet a life of paying less taxes isn’t as simple as picking up and moving to one of them. You should take into consideration how each state makes money, and also local taxes.
The 7 States With No Income Tax
- Alaska
- Florida
- Nevada
- South Dakota
- Texas
- Washington
- Wyoming
While these states have no income taxes, they fund themselves through other taxes including property taxes, corporate taxes, and sales taxes. If you are considering moving, you should consider all the taxes in a state and how those will affect your particular situation.
How states make money with no income tax
Let’s go through the states with no income tax one by one using the Tax Foundation’s most recent data, which is for 2010. The Tax Foundation has been collecting data on taxes since 1937 and its data takes into consideration an average of both state and local taxes.
1. Alaska
Alaska is known for its pristine wildlife as well as its oil and gas resources, most notably its North Slope with the famous Prudhoe Bay oil field. Alaska funds itself with royalties from oil and gas production as well as a 9.4% corporate income tax rate. In 2012 oil and gas royalties made up 83% of the state’s revenue and oil and gas corporate income taxes made up just under 8% of revenue. The state has no sales tax but local municipalities have varying sales taxes and property taxes. In 2010, per capita property tax was $1,865, and combined with all other taxes, the per capita state and local tax paid was $3,214 according to the Tax Foundation.
Those 65 and over should note that Alaska exempts senior citizens from the first $150,000 of assessed value for property taxes.
2. Florida
Florida is known for its great weather (minus hurricanes), tourism, and snowbirds. Florida funds itself with a 6% sales tax as well as a 5.5% corporate income tax. The sales tax made up 73% of the state’s revenue in fiscal year 2011-2012, with the corporate income tax making up 8.3%.
In 2010, per capita property tax was $1,507, and combined with all other taxes, the per capita state and local tax paid was $3,728 according to the Tax Foundation.
3. Nevada
Nevada is obviously best known for gambling and tourism. The state funds itself through a 6.85% sales tax. In the 2011-2012 fiscal year, sales and use taxes made up 71% of the state’s revenue. The state has no corporate income tax, which has helped it attract tech companies and start-ups from high-tax California. Many companies take advantage of the lack of a corporate income tax, and Las Vegas in particular is attracting start-ups through the efforts of Zappos’ CEO Tony Hsieh’s DowntownProject. In 2010, per capita property tax was $1,297, and combined with all other taxes, the per capita state and local tax paid was $3,297 according to the Tax Foundation.
4. South Dakota
South …read more
Source: FULL ARTICLE at DailyFinance
