Why does each state have a different income tax?

April 1, 2024

What is income tax?

Income tax is the tax collected each year from your yearly income. There are two types of income tax: federal and state. Federal income tax is collected from the government to support the American public. State income tax helps fund programs, education, healthcare, and other state needs.

Why is each state different?

Each state has a different tax system, depending on where you live each state is going to be different. Most states have income taxes but a select few do not; These states include Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Since these 9 states do not have an income tax, by using sales and property tax they have the necessary funds for that state’s programs.

Is no income tax better than having income tax?

There are pros and cons to having no income tax. States with no income tax can help save their residents money which is a pro, but it can be higher in other ways such as sales and property taxes and the overall cost of living.