Most individual states in the US collect state income tax along with federal income tax. These are two separate entities. There are even local governments imposing a certain income tax based on state income tax calculations. The seven states in the US that do not have income tax do tax dividends and interest which is an important concern for the retirees. These states are called No Income Tax States. It is to be noted that these states do require funds for various government services and they raise these funds through property taxes, sales taxes and various other fees.
An Overview of No Income Tax States
An evaluation of each of the No Income Tax States by making use of the most recent data provided by Tax Foundation will help you in getting a precise idea about how the states handle their expenditure on government services. You can also do this by and by reviewing the data on tax revenue for each state. The states that do not charge income tax in the United States are as follows:
Alaska is one of the best places for you if your main problem is saving money. This is the northernmost state of America and because of its harsh winters and its distance from the remaining part of the country; this state is not for every individual. As per Tax Foundation, average local and state tax paid was $3,319 which is the lowest amount among the other fifty states of America. There are low property taxes and no sales tax. The state funds its government services through the royalties on gas and oil production. Apart from low taxes, the people living in Alaska get benefit of these royalties with the Permanent Fund of Alaska paying yearly dividend depending on the earnings of royalties to the residents of Alaska.
The warm weather of Florida has always drawn tourists from throughout the world. The state of Florida has not had any kind of income tax since the year 1855. Government services of the state are funded through property taxes and 6% sales tax.
The tourism and the gambling industry of Nevada have always served as the main source of income for the people living in this state. Apart from this, the lack of corporate and individual income taxes serves as one of the major attractions for residents and businesses. Very similar to the other tourist-friendly states in the US, Nevada gets its funds from use and sales taxes starting at 6.85% making up 72% of the total revenue of this state.
South Dakota levies no income tax on corporations and individuals. This state obtains its funds through several use taxes and 4% sales tax. As per reports presented in the year 2013, the state made 71% of the total revenue from use and sales taxes.
Texas is a state in the United States that funds itself by way of 6.25% sales taxes, motor vehicle fuel and sales tax and the royalties and taxes on the production of natural gas and oil. There is no form of corporation income tax levied in Texas. This is genuinely helped through the gas and oil throughout the Gulf of Mexico and the entire state.
This state does not have a corporate income tax but it does have gross receipts tax charging businesses of 1% of their revenue roughly. The government services in this state are funded through 6.5% sales tax making up over 60% of the total revenue. There are localities adding to this total taking the sales tax as high as 9.5% in certain areas.
Wyoming acquires its funds through taxes on natural resources and even through property taxes. The property tax rate in this state is 9.5% and the sales tax rate is 4%.
States without any Sort of Income Tax
The states in the Unites States of America that do not levy any sort of income tax are as follows:
Tennessee does not have income tax but it actually has hall tax. This is 6% tax on dividends and interests specifically allowed by state constitution. The state also possesses 7% sales tax. One of the most contentious issues in Tennessee is the income taxes.
Even New Hampshire does not have income tax but it has 5% tax on dividends and interest. There is no sales tax in the state but there is an 8.5% corporate tax.
No Income Tax Really That Great?
If you’re considering moving to state that has no income tax make sure you will actually benefit from this. Many states that don’t have income tax will have other taxes to make up for it. For example Florida has a special tax on real estate property located in hurricane or flood zones. This tax is very expensive and other states have similar taxes.
My business provides payday loans online service and some states tax us heavily while others don’t. We are even restricted from lending in some states entirely. In some of these states it doesn’t make financial sense for us to offer services. My point is perform your due diligence before packing up and moving out because you could get slapped with an unexpected tax that makes that state just as expensive as where you came from.