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A Low-Income Tax Haven with High Property Taxes
The Pros and Cons of No Income Tax States
Texas was a popular low-tax destination back in the day, according to the article published in Study Finds. However, while it has no income tax on wages Texans face some of the highest property taxes, funding public safety, healthcare, and education. States have the power to set their own tax rules similar to how the federal government can impose federal taxes. Each state constitution allows for a variety of taxes on income, purchases and activities. For example, in November 2024 voters in some states will decide on tax increases to fund social programs. Oregon voters specifically will vote on increasing taxes on corporations to support an anti-poverty initiative.
Among states with income tax rates can either be flat or progressive where higher earners pay a higher percentage. The nine states no income tax on wages are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Some, like New Hampshire and Washington do tax investment income. In states no income tax other taxes often compensate. For instance, Tennessee has a high combined state and local sales tax rate of 9.548%. Alaska while not having state income or sales taxes imposes property taxes and significant taxes on oil and gas companies. Living in a state no income tax has both benefits and drawbacks. You might save money but could face higher costs in other areas like health care or public services. Texas, for example, spends less on health care and public transportation affecting overall quality of life.
READ ALSO: $1,000 Monthly Payments Test Basic Income Approach to Preventing Homelessness in the Bay Area
9 States with No Income Tax: The Pros and Cons of Tax Freedom (PHOTO: GavTax Advisory Services)
Higher Property and Sales Taxes Challenge Lower-Income Residents
Furthermore, Higher property or sales taxes can impact affordability especially for lower-income residents. Students working part-time for example might struggle with high sales taxes more than full-time workers with higher incomes. Additionally, most Americans still pay federal income taxes which can be higher than state income taxes. In summary, while states like Texas offer the advantage of no income tax they balance this with other taxes and potentially lower spending on public services. It’s essential to consider these trade-offs when deciding where to live.
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