For those well enough off, the prospect of living life in a state that assesses no state tax seems very attractive. Florida comes to mind, as does Texas, Alaska and a few others.
There are actually seven such states without any state income tax, and two others that assess tax only against investment income. The seven states are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. The two others are New Hampshire and Tennessee.
I can’t tell you the number of times I have wondered why I and everyone else shouldn’t move to a state without a state income tax. It just seems common sense. I know, as I am sure you do, that sales tax will be higher in tax free states, but I still think life without state income tax sounds awfully good.
But then I realized that States without state tax must have much far less income to devote to urgent and pressing services, especially those devoted to the less well off like -- access to health services, safety and policing, education and the like. And, if that’s the case, then I wondered what is life really like in such States.
So I decided to look at data on major crime by state to see if there were any correlations between states with and without state income tax (http://www.worldatlas.com/articles/the-most-dangerous-states-in-the-u-s.html).
My hypothesis in this review was that if there was less money for critical services, there should be more crimes in states without state income tax. The review, at first glance, supported this hypothesis. Of the first five states, by rank order, with the most violent crimes (Alaska, Nevada, Tennessee, New Mexico and Florida), three of the five were on the list of states without any income tax and one, Tennessee, assessed tax only on investment earnings. That’s interesting.
But, if one goes further and looks at the other four states without income tax and the other one taxing only investments, the data are far less convincing. South Dakota ranks 36th, Texas 15th, Washington 31st, Wyoming 48th. (New Hampshire, which taxes only investment income, is 47th).
There are obviously some important correlations here, but not enough to hang one’s hat on. My conclusion: move to a State that doesn’t assess income tax AND that is low on the list of high crime rates (South Dakota, Texas, Washington and Wyoming)!