why do some states have no income tax

The Last Frontier doesn't have a state sales or income tax -- for now. But with the dramatic drop in oil prices upon which Alaska depends heavily for revenue to pay for its state operations, the governor has proposed that the personal income tax, repealed in 1980, be reinstated. See a quick snapshot of tax rates. Sources: In the absence of an income tax, the Sunshine State relies on sales taxes. Local government costs are covered by property taxes. See a quick snapshot of tax rates. Sources: RATE SEARCH: If you're looking to save money for retirement,. The Silver State's treasury collects almost a billion dollars each year in gambling-related taxes and fees. See a quick snapshot of tax rates. Sources: To cover costs not paid for by an income tax, South Dakota's Department of Revenue Special Tax Division collects a variety of state taxes, including cigarette excise, bank franchise and alcoholic beverage taxes, and even a coin-operated laundromat license fee.


See a quick snapshot of tax rates. Sources: The Lone Star State depends on a state sales tax, with local jurisdictions collecting additional sales tax amounts and property taxes to help pay government bills. See a quick snapshot of tax rates. Sources: RATE SEARCH: If you're moving to a new job and looking for a house,. The Evergreen State remains in the no-income-tax fold thanks to its voters' rejection in November 2010 of a proposed income tax on Washington's wealthiest residents.


See a quick snapshot of tax rates. Sources: In addition to no personal state income tax, the Cowboy State also forgoes a corporate income tax. See a quick snapshot of tax rates. Sources: The Granite State doesn't tax wage income, but it does collect taxes on residents' dividend and interest income. See a quick snapshot of tax rates. Sources: Volunteer State residents don't have to file a return to pay taxes on wages. Tennessee does tax dividend and interest income, but that tax on investment income is being phased out and will be gone in 2022. See a quick snapshot of tax rates. Sources:
Currently, there are seven states that do not have an individual : Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.


Two additional states -- New Hampshire and Tennessee -- only charge tax on interest earnings and dividends from owning, so essentially, they have no income tax. How do these states get enough to operate their governments without an individual income tax? When it comes to taxes, each state has to look at its assets and consider what taxes would bring in the revenue it needs. In some cases, charging an income tax is not as useful as charging other types of taxes. Take Wyoming as an example. Wyoming has a of only slightly more than half a million people. With a population that small, relying on a personal income tax just wouldn't bring in enough money for the state government to run itself.


But what Wyoming does have is natural resources, so it's not surprising that two of the state's largest revenue sources are severance taxes (taxes on the removal of natural resources) and mineral royalty taxes (a tax on revenue earned from selling minerals from the state). Plus, with a small population and a lot of open land, Wyoming doesn't need as many government services, like highways and hospitals, so the state can easily survive without charging an income tax. Another good example is the state of Nevada. Like Wyoming, Nevada does not have a personal income tax. Instead, the two largest sources of revenue for the state are sales taxes and gaming (gambling) taxes.


This is not surprising since Nevada are a popular tourist destination. Because each state is different -- each has a different population, different resources, different potential sources of income and different needs -- it's left up to each state to decide how best to generate its own revenue. If each state was limited to bringing in, say, a 5 percent flat tax on income, states like Wyoming and Alaska (which have small populations) would probably not bring in enough money to function properly. So, how and when are you expected to pay state income taxes? Keep reading to find out how the money gets from your bank account to the government's hands.