Special Report

States With No Income Tax

1. Alaska
> Individual income tax collections per capita fiscal 2014:
$0
> Personal income per capita: $54,012 (8th highest)
> Corporate income tax collections per capita fiscal 2014: $555 (the highest)
> State & local property tax collections per capita fiscal 2013: $1,913 (10th highest)

Alaska is one of just seven states where residents pay no income tax to the state whatsoever. To make up for the revenue not gained through income tax, Alaska relies more on other sources of income. The average Alaskan pays nearly $2,000 in property taxes to state and local governments annually, the 10th largest such collection nationwide. Also, corporate income is taxed far more than in other states. Corporate income greater than $222,000, for example, is taxed at 9.4%, nearly the highest rate. Corporate income tax collections amount to $555 per capita each year in Alaska, the highest of any state.

Alaska also levies other taxes. While other states without an income tax tend to rely more heavily on property and sales taxes, more than two-thirds of Alaska’s tax collections — an exceptionally high proportion — come from other taxes. These include excise, severance, stock transfer, estate, and gift taxes.

2. Florida
> Individual income tax collections per capita fiscal 2014:
$0
> Personal income per capita: $42,737 (23rd lowest)
> Corporate income tax collections per capita fiscal 2014: $103 (13th lowest)
> State & local property tax collections per capita fiscal 2013: $1,216 (23rd lowest)

Florida does not have an income tax. The state also does not levy a property tax, although property is taxed at the local level. While local governments rely heavily on these property taxes to fund public programs, the average property tax collection per capita and as a percentage of home values, at $1,216 and 0.98%, are still below the respective national averages. While individuals are not required to pay taxes on their income, corporate income is taxed, although relatively little is collected. Florida collects $103 per capita in corporate income taxes, among the lowest compared with other states.

3. Nevada
> Individual income tax collections per capita fiscal 2014:
$0
> Personal income per capita: $40,742 (15th lowest)
> Corporate income tax collections per capita fiscal 2014: $0 (tied–5th lowest)
> State & local property tax collections per capita fiscal 2013: $972 (16th lowest)

Income from individuals as well as from corporations is not taxed in Nevada. The state also collects less than $1,000 per capita in property taxes annually, well below the national average collection of $1,439. The state’s sales tax rate of 6.8%, which includes local sales taxes, is also among the lower rates nationwide. Of all state and local tax collections in a given year, 38.2% come from taxes besides the major types, the fourth highest such proportion. These include for example, excise taxes on alcohol, tobacco, and motor vehicles.

More than one in every four Nevada workers is employed by the entertainment industry, the highest proportion of any state. Jobs in this industry tend to be relatively low paying. A typical person in Nevada earns $40,742 annually, one of the lower incomes of all states.

4. South Dakota
> Individual income tax collections per capita fiscal 2014:
$0
> Personal income per capita: $45,279 (23rd highest)
> Corporate income tax collections per capita fiscal 2014: $29 (6th lowest)
> State & local property tax collections per capita fiscal 2013: $1,231 (24th lowest)

The personal income in South Dakota of $45,279 per capita is in line with the national average annual income of $46,049. South Dakota’s state or local governments do not tax income, and the income goes further in the state than elsewhere. Goods and services in the state are 12.4% cheaper than they are nationwide, making the state the third most affordable state in the country. Corporations are also not subject to income taxes in South Dakota. The state’s combined sales tax rate of 5.8% is one of the lower rates in the country. However, general sales taxes in South Dakota account for 39.9% of taxes collected, the third highest such share.