9 States With No Income Tax and the Lowest Tax Burdens

Comparison of States With No Income Tax
No-Tax State	Tax Burden (% of Income)	Tax Burden Rank (1=lowest)	Affordability (1=best)	Best State to Live in (1=best)
Alaska	5.10%	1	47	45
Tennessee	5.74%	2	17	29
Wyoming	6.14%	3	33	35
New Hampshire	6.84%	5	38	4
Florida	6.97%	6	31	10
South Dakota	7.37%	8	14	15
Texas	8.19%	19	22	31
Nevada	8.23%	22	41	37
Washington	8.34%	26	44	1

Pros and Cons of States With No Income Tax

1. Alaska

Alaska has no state income or sales tax. The total state and local tax burden on Alaskans, including income, property, sales, and excise taxes, is just 5.10% of personal income, the lowest of all 50 states.

All residents of Alaska receive an annual payment from the Alaska Permanent Fund Corp. made up of revenue and investment earnings from mineral lease rentals and royalties. The per citizen dividend payment for 2021 was $1,114.

The cost of living in Alaska is high, though, mostly due to the state’s remote location. Alaska also levies the second-highest beer tax of any state in the union at $1.07 per gallon, bested only by Tennessee. The state ranks 47 out of 50 in affordability and 45 out of 50 on the U.S. News & World Report list of « Best States to Live In. »

Alaska has one of the highest and fastest-rising healthcare costs of any state in the U.S. That said, at $11,064 per capita in 2014—the most recent year the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary reported statistics—it also spent the most on healthcare, excluding the District of Columbia.

At $18,394 per pupil, it also spent the most on education of any state in the western U.S. in 2019. In 2017, Alaska’s infrastructure received a grade of C- from the American Society of Civil Engineers (ASCE).

2. Florida

This popular snowbird state features warm temperatures and a large population of retirees. Sales and excise taxes in Florida are above the national average, but the overall tax burden is just 6.97%—the sixth-lowest in the country.

Florida ranks 31st in affordability due to its higher-than-average housing costs. Still, Florida came in at 10 on the U.S. News & World Report « Best States to Live In » list.

In 2019, Florida was one of the lowest states in terms of school system spending, at $9,645 per pupil. In 2021, the ASCE gave Florida a C grade for its infrastructure. Six years earlier, Florida received the same grade from the Education Law Center for the fairness of its state school funding distribution. In 2014, its healthcare spending per capita was $8,076, $31 more than the national average.

3. Nevada

Nevada relies heavily on revenue from high sales taxes on everything from groceries to clothes, sin taxes on alcohol and gambling, and taxes on casinos and hotels. This results in an overall state-imposed tax burden of 8.23% of personal income for Nevadans. It is the second-highest-ranking overall tax burden of the states on this list, but still a very respectable 22 out of 50 when compared to all states.

That said, the high cost of living and housing puts Nevada near the bottom (41) when it comes to affordability. The state ranks 37th on the U.S. News & World Report « Best States to Live In » list.

Nevada’s spending on education in 2019 was $9,344 per pupil, the fourth-lowest in the western region of the U.S. One year earlier, in 2018, the ASCE gave Nevada a grade of C for its infrastructure.

In addition to receiving an F grade from the Education Law Center in 2015, Nevada was also the worst state overall in terms of the fairness of its state school funding distribution. Nevada’s healthcare spending in 2014 was $6,714 per capita, the lowest on this list and the fourth-lowest nationally.

4. South Dakota

Like many no-income-tax states, South Dakota rakes in revenue through other forms of taxation, including on cigarettes and alcohol. The home of the Lakota Sioux and the Black Hills has one of the highest sales tax rates in the country and above-average property tax rates. South Dakota’s unique position as home to several major companies in the credit-card industry, in addition to higher property and sales tax rates, helps to keep the state’s residents income-tax-free.

South Dakotans pay just 7.37% of their personal income in taxes, according to WalletHub, ranking the state 8th in terms of the overall tax burden. The state ranks 14th in affordability and 15th on the U.S. News & World Report « Best States to Live In » list.

South Dakota spent $8,933 per capita on healthcare in 2014, the 14th-highest in the nation. Although it spent more money on education, at $10,139 per pupil in 2019, it spent less than any other neighboring Midwestern state. Additionally, it received a grade of F for its school funding distribution.

South Dakota hasn’t received an official letter grade from the ASCE, though much of its infrastructure is notably deteriorated, with 17% of bridges rated structurally deficient and 90 dams considered to have high hazard potential.

5. Texas

The Lone Star State loathes personal income taxes so much it decided to forbid them in the state’s constitution. But because infrastructure and services must be paid for somehow, Texas relies on income from sales and excise taxes to foot the bill.

In some jurisdictions, sales tax can be as high as 8.25%. Property taxes are also higher than in most states, the net result of which is an overall tax burden of 8.19% of personal income. Nevertheless, Texans’ overall tax bite is still one of the lowest in the U.S., with the state ranking 19th. Texas is average for affordability at 22rd in the nation, but it was ranked 31st by U.S. News & World Report on the « Best States to Live In » list.

Texas spent $9,827 per pupil on education in 2019, ranking it below average among the 17 Southern states, and it received a D grade for its school funding distribution in 2015. In 2021, the ASCE awarded it a grade of C for its infrastructure. Texas spent $6,998 per capita on healthcare in 2014, the seventh-lowest amount in the U.S.

6. Washington

Washington hosts a young population, with only 15.9% of its residents over the age of 65, and many major employers, thanks to the lack of state-mandated corporate income tax. Residents do pay high sales and excise taxes, and gasoline is more expensive in Washington than in most other states. The state comes in at 26 out of 50, with an overall tax burden of 8.34%.

An unusually higher-than-average cost of living and housing hurts Washingtonians, putting the state at 44th in terms of affordability. For some residents that might not matter because their state was ranked by U.S. News & World Report as the overall best state to live in once again for 2021.

Washington spent $7,913 per capita on healthcare in 2014, $132 below the national average. Conversely, at $14,223 per pupil, it spent more on education than most in 2019, though it received a C grade for its school funding distribution four years earlier. In 2019, Washington earned the same grade for its infrastructure from the ASCE.

7. Wyoming

With an estimated six people per square mile, Wyoming is the second least densely populated state, bested only by Alaska, which has roughly one human being for every square mile. Citizens pay no personal or corporate state income taxes, no retirement income taxes, and enjoy low sales tax rates. The overall tax burden—including property, income, sales, and excise taxes as a percentage of personal income—is 6.14%, ranking the state third-lowest.

Like Alaska, Wyoming taxes natural resources, primarily oil, to make up for the lack of a personal income tax. The state ranks an average 33rd in affordability and 35th on the U.S. News list of « Best States to Live In. »

In 2019, at $16,304 per pupil, Wyoming was one of the highest spenders on education in the western U.S., second only to Alaska. It also earned a grade of A for its school funding distribution in 2015, the best on this list.

Wyoming’s healthcare spending in 2014 was more moderate by comparison, at $8,320 per capita. Although Wyoming hasn’t received an official letter grade for its infrastructure yet, the ASCE found that 6.9% of its bridges are structurally deficient and 99 of its dams have a high hazard potential.

8. Tennessee

Before 2016, Tennessee taxed income from investments, including most interest and dividends, but not wages. Legislation passed in 2016 included a plan to lower taxes on unearned income by 1% per year until the tax was eliminated at the start of 2021. To make up for the shortfall, Tennessee levies high sales taxes and the highest beer tax of any state in the union at $1.29 per gallon.

With full implementation of the new legislation, Tennessee expects to attract retirees who depend heavily on investment income. The state’s total tax burden is 5.74%, the second-lowest in the nation. In the affordability category, Tennessee ranks 17th overall, and on the U.S. News & World Report “Best States” list, it ranks 29th.

In 2019, at $9,868 per pupil, Tennessee ranked just above Texas in terms of education spending in the southern U.S. It also did a better job of fairly distributing its school funding than the Lone Star State did, earning the Equality State a C in 2015.

At $7,372 per capita, Tennessee ranked 39th in terms of healthcare spending in 2014. The state hasn’t received an official letter grade for its infrastructure yet, although the ASCE did note that 4.4% of its bridges are structurally deficient and 276 of its dams have a high hazard potential.

9. New Hampshire

New Hampshire does not tax earned income but does tax dividends and interest. New Hampshire’s Senate passed legislation to phase out the investment income tax by 1% per year over five years, with full implementation by 2027. The state has no state sales tax but does levy excise taxes, including taxes on alcohol, and its average property tax rate of 1.86% of property values is the third-highest in the country.

Even so, New Hampshire’s state and local tax burden is just 6.84% according to WalletHub, ranking the state fifth in the nation. The state ranks fourth on the U.S. News & World Report list of « Best States to Live In » and 38th in the nation for affordability.

Though New Hampshire spent more on education than any other state on this list, at $17,462 per pupil in 2019, its outlay was among the lowest in the northeastern region of the U.S. Additionally, in 2015, it earned a grade of D from the Education Law Center for its school funding distribution.

New Hampshire received a marginally better grade of C- for its infrastructure in 2017. At $9,589 per capita in 2014, its healthcare spending is the ninth-highest in the nation.

The Bottom Line

Despite the challenges no-tax states face, some seem to find a balance among low taxes, affordability, and providing a great place to live. Others struggle. One thing is clear: Low taxes alone do not provide a complete picture of the cost of living for any state listed here.