There are nine states that do not require a state income tax.
However, that doesn’t mean that there are no taxes at all.
Which states don’t have income taxes?
Each state has the power to determine how they will generate revenue. It is typically done through taxation, but some states opt out of income collection or sales tax. Additional details are available here. The nine states that don’t tax income at a state level are:
- New Hampshire
- South Dakota
When states pass an annual budget, they look at the income they’ve generated and what funds they will get from the federal government. Even though residents of those states don’t pay state income tax, they do still pay the federal government.
Income tax is organized at a state level and these states simply made the decision not to impose it. This means that other products are taxed to make up for the shortfall. For example, Washington state has a 49.4 cent tax on gas per gallon.