“No Income Tax” Has a Catch: How 9 States Actually Fund Themselves

Nine states take exactly nothing out of your paycheck for income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. On a $100,000 salary that's worth thousands a year versus a high-tax state — a genuine, permanent advantage. But "no income tax" is a headline, not a full accounting. States still have to fund roads, schools, and police, and the money comes from somewhere. Understanding where is the difference between a smart move and a costly assumption.

Where the money actually comes from

Broadly, no-income-tax states lean on three other levers, per the Tax Foundation:

• Sales tax. Tennessee and Washington carry some of the highest combined state-and-local sales taxes in the country — a bite you feel on nearly everything you buy, and one that falls hardest on lower-income households.
• Property tax. Texas and New Hampshire are famous for high property taxes; the tax bill on a home can rival what an income tax would have cost, and renters pay it indirectly through rent.
• Natural resources and tourism. Alaska and Wyoming ride mineral and energy revenue; Florida and Nevada lean on tourists to shoulder a big share of sales-tax collections.

The real test: what your paycheck is worth

The cleaner way to judge a no-tax state is to combine the tax win with the cost of living. We took the (identical, maxed-out) take-home on a $100,000 salary in each of the nine and adjusted it to national-median prices. The spread is striking — proof that "no income tax" and "great value" are not the same thing.

South Dakota comes out on top: no income tax and a below-average cost of living means a $100,000 salary is worth about $89,653 in real terms. But Washington shows the catch — despite the same zero income tax, high housing and living costs drag its real value down to roughly $65,996, well behind plenty of states that do tax income. The no-tax label didn't make it cheap.

So is a no-tax state worth it?

Often, yes — especially if you earn a high income (where the income-tax savings are largest) and land in a no-tax state that's also affordable. The mistake is treating "no income tax" as the whole decision. A high earner buying a pricey home in a high-property-tax no-income-tax state can easily pay more overall than they would in a modest-income-tax state with cheaper housing. As always, the honest comparison is your full tax-and-cost picture, not one line of it.

See how your salary's real value compares between any two states — no-tax or not — in the comparison tool, or read the deeper dive on whether no-tax states actually cost less.

Methodology

The nine states levy no tax on wage income for 2026. "Real value" is the after-tax take-home on a $100,000 single-filer salary, multiplied by the ratio of national-median monthly cost of living to the state's (BEA Regional Price Parities). Sales- and property-tax characterizations are directional and cite the Tax Foundation. See our methodology.