The Best—and Worst—States to Avoid Income Taxes

By Alex McIntyre, Jennifer Prince and Christopher Cannon Christopher Cannon

April 13, 2016

Tax Day—it’s April 18 this year, for you procrastinators—is a bracing annual reminder of how deeply the government reaches into our pockets. One way to reduce your income tax burden? Switch states. Federal tax rates are the same no matter where you live, but state income taxes are all over the place. Some have progressive tax systems, where top earners pay a higher marginal rate on their taxable income than those who make less. Eight states have a flat tax, applying the same percentage levy across all incomes. Three states actually have regressive income taxes, where the mega-wealthy pay a lower percentage of their taxable income than those in the middle. And nine states have no income tax at all. See how your state stacks up.

No taxation without some explanation

This chart lets you compare the effective state tax rates of a household earning the U.S. median of $36,841 in adjusted gross income with a household earning $1,860,848, just enough to enter the top 0.1%. (Complete income percentile data wasn’t available for households with incomes below the national median.) Sort for different views.

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Widest tax gap

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Median income group (top 50%)
Highest income group (top 0.1%)
Flat effective tax rate across all income groups

Effective tax rate

Note: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming have no state income tax. New Hampshire and Tennessee tax interest and dividend income only. The average effective tax represents the overall rate paid by a group of households representing the top 50%, top 25%, top 10%, top 5%, top 1%, and top 0.1%.

How taxes shape up state to state

Here’s another way to compare the tax burdens of middle and top earners. California has both the highest taxes and the steepest curve, indicating a highly progressive tax structure. Hawaii is close behind and has the nation’s greatest number of tax brackets with 12. These charts illustrate tax rates for single filers.

Income percentile

Effective tax rate

Income percentile

Minnesota, New Jersey, and Vermont also offer solidly progressive tax structures, with a fairly steep curve between the median and top 0.1% earners.

Illinois, Indiana, and Pennsylvania have flat or nearly flat effective tax rates after standard deductions and exemptions are factored in.

Then there are the curious cases of regressive taxes. Five states allow taxpayers to deduct their federal income taxes without itemizing. In general this is a boon to the wealthy, who have the highest federal tax rates. This can lead to a flattening of the tax burden as income rises. Oregon and Missouri restrict this tax deduction above a certain income, maintaining a progressive tax structure.

Three other states have no such restrictions. In Iowa and Louisiana, an earner in the top 0.1% pays a lower effective tax rate than some of the states’ lower earners. Alabama is in a league of its own. Since its top tax bracket kicks in at only $3,000 for singles, and it permits an unlimited federal tax deduction, the effective tax rate steadily declines from middle to top incomes.

It’s important to note that income taxes are only part of the picture. According to the U.S. Census, on average, states’ individual income taxes comprise 36.5% of total tax revenues. State sales tax, at 46.5%, provides the most revenue for state governments. And property taxes, which are determined locally and in some states take a big bite, can be progressive or closer to flat. One way or another, they’re going to get you to pay.

Red states, blue states, taxed states, flat states

Explore how state taxes compare by income, marital status and political party.

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Political party

In the 2012 presidential election, states that:

Voted for Barack Obama
Voted for Mitt Romney