Joseph Johns
Joseph Johns is a state tax policy analyst with the Tax Foundation, a non-partisan non-profit organization that has been analyzing tax policies since 1937. TaxFoundation.org
Nothing is certain except death and taxes—and even some taxes aren’t certain if you choose the right state.
Examples: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas and Wyoming don’t impose state income taxes. You could also add New Hampshire and Washington to that list, depending on your answer to the question, “What is income tax?” While they don’t tax earned income, New Hampshire does tax dividend and interest income…and Washington taxes capital gains income.
Reality: There are no truly tax-free states. That’s because states with no personal income tax inevitably raise money for public services using other forms of taxation.
Sales tax receives less attention than income tax, yet it produces more than 30% of state tax revenue nationwide. Sales tax is particularly high in some no-income-tax states.
Examples: Tennessee’s state and local sales tax rate averages somewhere between 9.55% and 10%* when state and local sales taxes are combined—that’s the second highest in the US behind Louisiana. Louisiana’s combined state and local sales tax rate is only slightly higher at 9.56%. They are followed by Washington at 9.38% …Nevada at 8.24%…and Texas at 8.2%.
Comparing state sales taxes is complicated because there are different ranges of sales taxes in different places—but the bottom line is that total state and local per-capita taxes on retail sales average $3,147 in Washington and $1,664 in Texas, both well above the national average of $1,334.
Wyoming’s average state and local sales tax of 5.44% isn’t exceptionally high…nor are South Dakota’s 6.11% or Florida’s 7%.
If you’re searching for states with no income tax and no sales tax, New Hampshire and Alaska come closest. New Hampshire has no sales tax, but certain forms of income are taxed…while Alaska has no income tax and no state sales tax, but there are local sales taxes, averaging just 1.82%.
Property taxes vary by town, but they are much higher in some states than others. Some estimates suggest that New Hampshire homeowners pay 1.61% of the value of their owner-occupied homes in property taxes each year, on average—that’s among the highest in the US. Texas property tax is 1.6%…Alaska, 1.17%…and South Dakota, 1.08%—all well above the national average of 1.11%.
Recent analysis says that Nevada’s 0.44% of owner-occupied housing value is among the lowest property tax burdens in the US, and Wyoming’s 0.55% and Tennessee’s 0.56% aren’t far behind. Florida’s 0.80% and Washington’s 0.84% land near the middle of the pack.
When states are ranked according to overall state and local taxes as a percentage of income, Alaska, at 4.6%, easily has the lowest combined state and local tax burden. In terms of dollar figures, the average Alaska resident pays $2,943 in annual state and local taxes.
Wyoming comes in second at 7.5% and Tennessee third at 7.6%. Tennesseans pay an average of $4,036 in annual state and local taxes…and Wyoming residents, $4,691.
Also below the US average of 10.3% are South Dakota at 8.4% …Texas at 8.6% …Florida at 9.1%…Nevada at 9.6%…and New Hampshire at 9.6%. Washington’s 10.7% is above average. Reminder: The savings from living in low-tax-burden states can be more substantial for high earners…and people moving from extremely high-tax states such as New Jersey, California, New York or Connecticut.
*Tax data cited above is the most recent available. Tax rates generally are up-to-date for 2024, but other details, such as average tax burdens, often are based on the 2021 or 2022 tax year.
