Why Do Some States Have No Income Tax?

Tax season just ended, and now there is more time to question tax practices throughout the country.  One of the most interesting tax facts to note is that some states don’t have any income tax whatsoever.  And that fact might leave you shaking your head and asking why.

We’re here to help you answer that question; in fact, there are seven states that currently don’t have income tax.Nevada

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas
  • Washington
  • Wyoming

So why don’t these states have an income tax? Although each of these states has their own reasons, the main answer is that the states have found better sources of income than income tax could bring in.

For example, Alaska gets enough revenue from petroleum that they don’t need to tax the income of the natives, and Wyoming has such a small population that an income tax wouldn’t make a dent in the state’s expenses. Since Wyoming has such a small population, they rely on severance and mineral taxes.

Nevada substitutes income tax for their gaming and sales taxes, and all of the states on the income tax-free list find one way or another to make up the additional funds.

Although it may seem unfair that some states aren’t paying income taxes, the people in those states are still paying plenty of taxes with the other taxes their states receive.   In the end, it all balances out pretty well, and every state asks for some taxes to generate the necessary income to keep the state functions and operations running.

photo credit: pacomexico via photopin cc & Kaloozer via photopin cc

Related Posts