Are taxes eating your paycheck? These are the states where you can keep the most of it

As millions prepare to file their state and federal income taxes, some residents will be able to forgo the former. In eight states, income is not taxed at the state level, which may appear to lower their overall tax burden. However, in many cases, these states generate revenue through high taxes in other areas.

There are a total of nine states that do not tax income at the state level:

Property and sales taxes are other duties that can be imposed by state governments to fund their budgets. For instance, Tennessee, which does not tax income, has the highest average sales tax rates in the country. The average combined sales tax paid by consumers in the state, based on duties applied by the state and local governments, is 10 percent according to The Tax Foundation.

The strategy a state deploys regarding taxation differs, but the mission is the same: to fund the budget passed by the state legislature. In addition to the taxes they levy, states also receive funding from the federal government.

The states with the lowest property taxes

According to the US Census Bureau, the percent of revenue coming from property and sales taxes is higher in states that don’t tax income compared to those that do. Data from 2022 showed that in the eight states without income tax, the average revenue the state generated from property tax was 2.7 percent of the pie, whereas it was only 1 percent in states where workers pay income tax.

Nevada and South Dakota impose low taxes on property, but Nevada does levy higher sales taxes than many other states.

States without income tax generate more revenue through sales taxes

The story is more dramatic when comparing the two groups with regard to the percent of total revenue generated by sales tax. In the eight states without income tax, around 28 percent of revenue was obtained through sales tax, and in the other states the average was just under 18 percent.

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