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Tuesday, Aug. 26, 2025

Do states with no income tax have an increased reliance on other kinds of tax?

Matthew Yim, Oklahoma Watch
yes

States with eliminated or significantly lowered income taxes frequently make up the lost revenue through other taxes, namely sales and property taxes.

All states without income tax have higher sales and/or property tax reliance than the national averages. Texas and New Hampshire, for example, have some of the highest property taxes in the country.

Lack of income tax has few benefits for lower-income households. In Florida and Texas, the lowest 20% of families pay a greater share of their income in taxes than the richest 1% in California. That also applies to Oklahoma, where the lowest 20% spend almost double the proportion of income as the top 1%.

A bill passed in May will further reduce Oklahoma’s income tax, which was 7% in 2004, from 4.75% to 4.5%. Those earning the state’s median income will save $143 annually.

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