Special Report

States With No Income Tax

5. Texas
> Individual income tax collections per capita fiscal 2014:
$0
> Personal income per capita: $45,669 (22nd highest)
> Corporate income tax collections per capita fiscal 2014: $0 (tied–5th lowest)
> State & local property tax collections per capita fiscal 2013: $1,560 (14th highest)

Taxes are the primary source of revenue for the government. If state government leaders elect not to levy a major tax, another source of revenue is often needed to replace it. In Texas, where individual and corporate income is not taxed, revenue is largely generated through property and sales taxes. Property taxes collected in the state come to 1.7% of home values and $1,560 per capita, each higher than the averages for all states. Property and sales taxes account for 40.4% and 31.9% of state and local tax collections — each far higher shares than in most other states.

6. Washington
> Individual income tax collections per capita fiscal 2014:
$0
> Personal income per capita: $49,610 (12th highest)
> Corporate income tax collections per capita fiscal 2014: $0 (tied–5th lowest)
> State & local property tax collections per capita fiscal 2013: $1,350 (23rd highest)

Due largely to its non-existent income tax, no state relies more heavily on general sales taxes than Washington. In a given year, 44.8% of state and local tax revenue comes from sales taxes, approximately double the average proportion of 22.5% across all states. The high reliance is likely also due in part to the relatively high cost of living in Washington. The cost of rent, goods, and services in the state is 3.2% higher than across the nation, making Washington the 10th most expensive state.

7. Wyoming
> Individual income tax collections per capita fiscal 2014:
$0
> Personal income per capita: $54,584 (6th highest)
> Corporate income tax collections per capita fiscal 2014: $0 (tied–5th lowest)
> State & local property tax collections per capita fiscal 2013: $2,173 (7th highest)

Income earned from mining fell 1.9% nationwide in the third quarter of 2015. This decline had a particularly large impact on income growth in Wyoming, which mines around 40% of all coal mined in the country. Still, individuals in the state earn $54,584 annually on average, the sixth highest of all states — and that income is not taxed.

To make up for the revenue not collected through income tax, Wyoming collects more in property taxes. Property tax collections per capita total $2,173, the seventh highest collection nationwide. With the relatively high incomes, however, residents are able to afford more expensive homes. This means the property tax burden is lower. Homeowners pay an average of 0.51% of home values in property taxes, the fourth lowest percentage of all states.