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Which state will be the next to axe its income tax?

Updated: Aug 10

Take a glance at tax policy across the nation and you'll notice an unmistakable trend - states are lowering or doing away with their state income taxes altogether.

There are currently seven no income tax states: Texas, Florida, Tennessee, South Dakota, Nevada, Alaska and Wyoming. New Hampshire will make eight when its income tax on interest and dividends is phased out in just about 15 months.

Washington State lost its spot on this list. As we've previously reported, Washington decided to get rid of its no-income-tax advantage with the adoption of an income tax on capital gains.

Idaho and Montana are going in the other direction. Idaho has reduced its income tax rate to a flat 5.8%. Montana lowered its rate to 5.9%.

Could Idaho or Montana join the list of states with no income tax at all? At the moment, it seems unlikely. But as we previously recommended, lawmakers could take the next step and adopt triggers to further lower rates.

Arizona, meantime, just lowered its income tax to 2.5%. Some lawmakers there want to get rid of the tax altogether.

Kentucky is another state worth watching. Lawmakers there have adopted a policy that reduces the income tax up to .5% each year that certain revenue triggers are met. Kentucky's income tax rate goes down to 4.0% at the beginning of 2024.

Even some Democratic states are getting into the income tax cut action. Connecticut, for example, is implementing major income tax cuts as well.

Would you support phasing out your state income tax?

  • Yes

  • No

  • Not Sure

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