More States Eliminating Personal Income Tax: Jonathan Williams on American Radio Journal

For all the talk about what government can invest in, one of the most significant economic developments of recent years has been what state governments have chosen not to take, namely, income taxes. Since 2021, half the states in the country have enacted reductions to their personal income taxes. Many have gone further, abandoning the old progressive tax structures in favor of simple, low rate, flat taxes. Kansas and Ohio became the latest states to make that shift.

Earlier this year, a growing number of states have asked a more fundamental question: if income taxes discourage work, investment, and entrepreneurship, why have them at all? Three states have now answered that question by passing laws that will fully eliminate their personal income taxes over time.

The income tax has long been treated as a necessary feature of modern government, but necessity is a matter of evidence, not assumption, and the evidence is increasingly difficult to ignore. States without personal income taxes—nine in total, although Washington state has recently added a capital gains tax of its own—have consistently outperformed many of their high tax peers. According to our Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, eight of the nine no income tax states rank in the top half for economic outlook.

This is not coincidence; it’s incentive. People go where prospects are better, and the numbers tell a story more compelling than any slogan about shared sacrifice. Tennessee, for example, gained more than 250,000 residents through net domestic in-migration from 2020 to 2024. Texas, also without a personal income tax, gained nearly 750,000 during that period. Florida gained nearly 900,000, and among the remaining no income tax states, Nevada, New Hampshire, South Dakota, and Wyoming each saw net in-migration over that same period. When people vote with their feet, there’s little ambiguity about which policies encourage opportunity and which stifle it.

The states losing residents, the passives, tend to share another characteristic: that is, steep personal income tax rates. California, despite its wonderful weather, lost more than 1.4 million residents to the other 49 states over the last four years. New York, over a million, and even Oregon, once a magnet for newcomers, has become an out-migration state while maintaining the nation’s second highest top personal income tax. Incentives matter, and they always have mattered. They don’t stop mattering simply because the state government needs revenue either.

Given these realities, it should surprise no one that some states are pushing beyond tax cuts in the flat tax conversations and towards that full elimination of the income tax. Kentucky led the way in 2022 by enacting a mechanism to gradually reduce its income tax whenever fiscal conditions met certain benchmarks. This last year, Mississippi and Oklahoma followed suit. These states adopted what we call triggers to reduce the revenues only when the budgets are healthy and reserves are full and spending is under control. In other words, the process forces the discipline that politicians often promise but seldom deliver.

Policy makers are acknowledging that prosperity comes not from redistributing wealth but from making it easier for wealth to be created in the first place. The predictable criticism is that eliminating income taxes will starve government of revenue needed for essential services. Yet this would imply that the nine states already operating without such taxes must be suffering some obvious collapse in public services. They are not. Their budgets function sometimes more responsibly than those in high tax states, precisely because economic vitality expands the tax base in other ways. People earning money, spending money, investing money, and starting businesses ultimately generate more taxable activities than people fleeing punitive tax structures.

Americans do not pay taxes because doing so is enjoyable, but because government must perform certain core functions. The real issue is not whether taxes are necessary, but which taxes are justified by the evidence rather than habit. The experience of the no income tax state shows that a personal income tax is not among the necessities.

The movement now underway in Kentucky, Mississippi, and Oklahoma reflects a broader reality in public policy: that government growth is not inevitable, that taxpayers’ interests need not always rank second to bureaucratic demands, and that states remain, as they have long been, competitive laboratories testing which ideas lead to growth and which lead to decline. In the end, results are what matter, not rhetoric, and the results are pointing in one direction.

Freedom works.