During the COVID-19 pandemic, millions of Americans packed up and moved — chasing sunshine, freedom and, let’s be honest, a lower tax bill. Fleeing from New York to Florida and California to Texas, one thing has become clear over the past five years. People decide where to live in part to minimize their tax bill.
When it comes to state income taxes, the differences across America are glaring and often political. The question practically asks itself: Should all 50 states eliminate income tax altogether? Can states afford to eliminate taxes altogether? How do some states do it when others charge double-digit taxes?
Let’s dig in, not as some utopian fantasy, but as a serious look at how zero-income-tax states operate, why people are flocking there and why many blue states won’t even touch the idea.
Why Some States Have Zero Income Tax And Some Don’t
As of 2025, there are nine states that do not impose a general state income tax on wages and earned income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Technically, New Hampshire, until 2025, taxed interest and dividends, but it repealed that levy as of January 1, making it more of a "no income tax" state across the board.
Why can those states do without collecting income taxes? It’s usually because they lean heavily on alternative revenue sources: