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                Windsurfing at Palo Alto in SF Bay in May 2009 States with no Taxes on Income
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States that do not tax earned or investment income

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August 2, 2012
  Seven States currently have no income tax.  Two others only tax interest and dividend income.  [note 1] 

List of Seven States without an individual income tax:
  1. Alaska – no individual tax but has a state corporate income tax. Like New Hampshire, Alaska has no state sales tax. Alaska has annual Permanent Fund Dividend for all citizens living in Alaska after two years.
  2.  Florida – no individual income tax but has a corporate income tax (at a 5% rate). The state once had a tax on "intangible personal property" held on the first day of the year (stocks, bonds, mutual funds, money market funds, etc.), but it was abolished at the start of 2007.
  3. Nevada – has no individual or corporate income tax. Nevada gets most of its revenue from gambling and sales taxes.
  4. South Dakota – no individual income tax but has a state corporate income tax on financial institutions.
  5. Texas – no individual income tax or corporate income tax. In May 2007, the legislature replaced the franchise tax with a gross margins tax on businesses (sole proprietorships and some partnerships were automatically exempt; corporations with receipts below a certain level were also exempt as were corporations whose tax liability was also below a specified amount), which was amended in 2009 to increase the exemption level. The Texas Constitution places severe restrictions on passage of an individual income tax and use of its proceeds.
  6. Washington – no individual tax but has a business and occupation tax (B&O) on gross receipts, applied to "almost all businesses located or doing business in Washington." It varies from 0.138% to 1.9% depending on the type of industry.
  7. Wyoming has no individual or corporate income taxes.[19]
List of Two States without an individual income tax but have taxes on tax interest and dividend income
  1. New Hampshire – has an Interest and Dividends Tax of 5%, and a Business Profits Tax of 8.5%. A Gambling Winnings Tax of 10% went into effect July 1, 2009 and was repealed May 11, 2011. New Hampshire has no sales tax.
  2. Tennessee has a 6% tax on income received from stocks and bonds not taxed ad valorem. WARNING! In 1932, the Tennessee Supreme Court struck down a broad-based individual income tax that had passed the General Assembly, in the case of Evans v. McCabe. However, a number of Attorneys General have recently opined that, if properly worded, a state income tax would be found constitutional by today's court, due to a 1971 constitutional amendment.
Map of States with No Individual Income Tax
States taxing only dividend and interest income are in yellow
Map of USA showing states with no state income tax

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