Surprise! States without an income tax have higher sales and property taxes

Photo by Martha Soukup used under a Creative Commons license.

States without an income tax rely on other taxes to fund government. Far from discovering magical, revenue boosting powers by not having an income tax, these states simply charge higher sales and property taxes.

A new report from the Center on Budget and Policy Priorities shows how much higher:

  • In fiscal year 2009, the nine states without an income tax had property taxes that were, on average, 12 percent higher per capita and 8 percent higher as a share of personal income than the national average.
  • Sales taxes in those nine states were 21 percent higher per capita and 18 percent higher as a share of personal income than the national average.

The property tax comparison is especially relevant for Oklahoma, since our income tax helps us to keep property taxes very low. In every state without an income tax, people pay much higher property taxes compared to Oklahoma. The average per capita property tax in no-income tax states is more than two-and-a-half times what we pay here.

Oklahoma lawmakers may promise that they would never raise these other taxes, but if the income tax is slashed, the intense pressure to maintain schools, roads, and other vital services, as well pay our debts, would likely force their hand. Or they will pass the buck to local governments who will then to have raise taxes.

As the CBPP report explains:

Higher sales and property taxes can occur in at least two ways.  The state legislature, faced with the need to fund schools, health care and other services and without the income tax revenue, may increase sales taxes or property taxes (as well as other revenue sources such as fees or excise taxes).  Or, the legislature may reduce funding to local governments and school districts or shift spending obligations to localities, which in turn may raise taxes.

The most likely outcome from eliminating the income tax is a combination of tax increases and additional cuts to core services like education and transportation. That means more taxes are shifted onto middle- and lower-income families, since sales and property taxes take the largest share of income from those least able to afford it.

Ultimately, the average Oklahoman would pay more and get less. Far from helping our economy, slashing the income tax would make it even more difficult for hard-working Oklahomans to get by.

For more on the income tax debate, see our tax reform information page.


Gene Perry worked for OK Policy from 2011 to 2019. He is a native Oklahoman and a citizen of the Cherokee Nation. He graduated from the University of Oklahoma with a B.A. in history and an M.A. in journalism.

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