December 30, 2013

The Cap Times: What do states with no income tax do for revenue?

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(Original Post)

December 27, 2013 10:25 am • STEVEN ELBOW | The Capital Times | [email protected]

Gov. Scott Walker raised a lot of eyebrows earlier this month when he broached the idea of scrapping the state income tax, joining seven other states.

So what do Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming do for money?

Here’s a rundown from the website Motley Fool, drawing on information from the Tax Foundation, which has been compiling state tax data since 1937.

Other than Alaska and Wyoming, which depend on natural resources taxes, most states — as Wisconsin presumably would — rely on increased sales taxes, along with assorted fuel, corporate and property taxes.

The chief argument against trading in the income tax for a sales tax is that sales taxes raise the proportion of taxes paid by the poor, and lessen the burden for the rich. Unfortunately, the data from the Tax Foundation doesn’t provide information on the distrubution of the tax burden on different income groups.


But this report from the Institute on Taxation and Economic Policy shows that four of the seven non-income tax states — as well as Tennessee, which has a limited income tax — make the top 10 list of the most regressive states in the nation.