How do some states (TN, FL, etc) get by with having no income tax? Why can’t every state get rid of it?
In: Economics
Texas does it by taxing the hell out of middle class property owners. Rich folks with land get ag or wildlife exemptions, so they pay a fraction of what the rest of us pay.
Why would you want that? Income tax can favor poor people over rich people. Other taxes like sales tax fall more heavily on the poor.
You need taxes. Income tax is one of the most fair. Google “Georgism” for another alternative.
States have multiple revenue sources. Income tax, sales tax, property tax, tolls, registration fees, fines and fees in court cases, excise taxes on things like alcohol sales, severance taxes and others. States that don’t have income tax just use other sources for their revenue. Wyoming, for example, has a lot of revenue from severance taxes, which are taxes paid by companies to take oil and gas and other minerals from Wyoming. Florida has a strong tourism industry so sales and hospitality taxes make up the difference in income tax. Other states like Washington or Tennessee rely mostly in sales tax. There are reasons why some people consider different taxes fair or not. Sales tax tends to be a flat rate, which is regressive, meaning it costs poor people a higher portion of their income than it costs rich people. Income tax at the state level often is also a flat tax (again regressive), but some states have higher rates the more someone earns.
Gas tax, tolls, higher fees for licenses, sales tax. If they don’t get it one way, they’ll get it another.
Edit: some states will favor more regressive revenue streams over more progressive ones like income tax.
Floridian here – We require unchecked growth and tourism to fund basic services.
My county is having a huge fight with property developers because they keep adding to the population but the increase is impacting existing infrastructure and causing a deficit, which will require either higher property or sales taxes to make up the shortfalls or more growth that kicks the budget issues down the road.
Also, keep in mind that you get what you pay for. There’s a reason why the state is known for terrible schools and zero social safety programs.
Every state has different budget needs. There’s mandatory spending like food stamps, wic, housing, etc. And discretionary spending like education, roads, etc etc.
If they have no income tax then they either don’t need the income or they offset it in other ways. Like Texas has no income tax but has high property tax.
They don’t do anything for their residents. That is why these states rank worst in the on everything positive for people like eductation, healtchcare and such.
They’re getting their money from somewhere else. They may not tax income, but they will increase taxes for other things.
There are lots of different ways to tax people: real estate taxes, sales tax, vice/excise taxes, gas taxes, etc of the states that you mentioned most of them just shift the way that they tax their residents. There are exceptions: Alaska notably.
To attend to the comments, there are definitely differences in what you receive for your tax dollars, but higher taxes DO NOT inherently mean that the government is being efficient with your money. California is a notable example of a state with a huge amount of tax revenue (often called the “sunshine tax”) that is highly inefficient in their spending. California has $**220.59 billion in tax revenue, spends** [**$109B of that on education**](https://educationdata.org/public-education-spending-statistics#california) **yet they** [**rank #37 in k-12 education**](https://www.usnews.com/news/best-states/rankings/education/prek-12) *(ironically they have the best university system in the world)*. They have spent billions combating homelessness, yet have the largest homeless population in the country.
So could other states get rid of income taxes? absolutely. But they would likely shift their tax collection to different means with not tangible difference to residents.
Paying attention to taxes (tax revenue and spending), voting for elected officials who are fiscally conservative (not necessarily socially conservative), and voting with your feet (moving to states that are more efficient with tax dollars) are important duties for American Citizens.
You can check out smart asset to see differences: https://smartasset.com/taxes/federal-tax-calculator. As well you cal read up on total tax burden to understand the nuances: https://taxfoundation.org/data/all/state/tax-burden-by-state-2022/
(1) Raise money other places;
(2) Take more money from the federal government than their residents pay in compared to other states (so, getting money from other states’ residents);
(3) Spend their money on less/lower quality infrastructure.
Not every state does all three but basically all the possibilities boil down to one or more of these.
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