Policy Documents

Policy Study - No Income Tax: The Key to Economic Growth

Amy K. Frantz –
May 1, 2008

Seven states in our nation collect no state income tax from their citizens: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Two other states, New Hampshire and Tennessee, tax only dividend and interest income.

Studies show that states without an income tax have greater economic growth rates than states with an income tax, including greater rates of income growth, population growth, job growth, and are more attractive to businesses looking for locations to build or expand. Looking at economic statistics and quality of life markers for Iowa, which has an income tax, and South Dakota, which does not, reinforces the findings of those studies — that states without an income tax experience greater levels of economic success.