By gustavofrazao @ Adobe Stock
There are currently eight states in America that have no personal income tax:
- Alaska
- Florida
- New Hampshire
- Nevada
- South Dakota
- Tennessee
- Texas
- Wyoming
Washington also charges no tax on personal income, but does tax capital gains over $270,000.
But now, Kentucky and Tennessee could be set do join the exclusive club of states without personal income taxes, making them the first states to do so since 1980 when Alaska joined.
David Lieb of the Associated Press explains what Mississippi is doing:
Republican Mississippi Gov. Tate Reeves recently signed a law gradually reducing the state’s income tax rate from 4% to 3% by 2030 and setting state revenue growth benchmarks that could trigger additional incremental cuts until the tax is eliminated. The law also reduces the sales tax on groceries and raises the gasoline tax.
If cash reserves are fully funded and revenue triggers are met each year, Mississippi’s income tax could be gone by 2040.
He continues, explaining Kentucky’s plan:
A 2022 Kentucky law reduced the state’s income tax rate and set a series of revenue-based triggers that could gradually lower the tax to zero. But unlike in Mississippi, the triggers aren’t automatic. Rather, the Kentucky General Assembly must approve each additional decrease in the tax rate.
That has led to a series of tax-cutting measures, including two new laws this year. One implements the next tax rate reduction from 4% to 3.5% starting in 2026. The second makes it easier to continue cutting the tax rate in the future by allowing smaller incremental reductions if revenue growth isn’t sufficient to trigger a 0.5 percentage point reduction.
Learn more about state taxes on my Liberty & Freedom Map.
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