What States Do Not Have an Income Tax?
While most states add their own income tax onto the federal income tax, a few do not. As of 2009, seven states -- Alaska, Nevada, South Dakota, Washington, Texas, Wyoming, and Florida -- do not charge an income tax. Two other states, New Hampshire and Tennessee, tax only dividend and interest income. Each state's officials have the right to implement an income tax at their own discretion. Some states charge income tax on businesses but not individuals, or vice versa. The amount of income tax charged varies from state to state.
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Income Tax
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A personal income tax is a tax that is levied on the income an individual makes. Individuals pay into personal income tax after each pay period, and at the end of the year they file their personal income tax. This is to determine if they have paid enough into their personal income tax or if they have overpaid. Those who have paid less will be given a bill to pay the remainder of the tax owed. Those who have paid more than they needed to pay will receive an income tax refund.
Is Not Paying Income Tax A Benefit?
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Most people feel that not paying a personal income tax saves them a lot of money. However, this is not always the case. In states that do not charge an income tax, the corporate tax can be high, as well as the sales tax that all individuals pay. The property tax can also be high.
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Alaska
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Alaska is one of the seven states that do not charge an income tax. The state relies primarily on petroleum revenue, which more than makes up for what it does not collect in income tax. In addition, the state does not collect a sales tax.
Washington
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Washington does not charge a personal income tax or a corporate business tax. The state does, however, charge a business and occupation tax for all firms doing business in Washington. Businesses may also have to pay a public utility tax.
Wyoming
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Wyoming is another of the seven states that does not charge a personal income tax on individual citizens. In addition to not imposing an income tax, the state does not tax any retirement benefits of an individual, even if the person is coming from another state.
Florida
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Florida does not charge a personal income tax. Instead, the state imposes a sales tax and an intangible tax. Much of the intangible tax was discontinued in 2007, but it still exists for leases of government-owned property and on notes secured by a mortgage on Florida real property. Businesses also help fund the state budget, because Florida charges a corporate tax.
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