So you're looking to find a good deal on taxes, and you need to know if packing up the wife, kids and Aunt Edna is worth the trouble? In some cases, it may be.
Sales taxes compose about a third of revenue collected by states, and 13 states have raised their sales tax rates in recent years. A few purposely offer the lowest sales tax rates or don't charge sales tax at all because they want growth more than a dog wants a bone. Forty-three states impose an income tax with wide-ranging rates, but most who made our list had none.
While these rates are low, be sure to figure in cost-of-living, other special taxes and those local taxes that can start to add up. Also, states with the lowest sales tax rate or the lowest income tax rates don't always offer both. Even if you're not looking to move, keep these states marked on the map. The savings could be worth it during your next vacation. So here's our rundown to help your search:
New Hampshire is that idyllic state that we always confuse with Vermont on the map. But don't call them little! New Hampshire is more than just cranky Bostonians who wanted a backyard. Their motto, "Live Free or Die", says it all. While it has no income or sales tax, be sure to check the fine print for taxes on property and investments. Even then, you're likely to come out ahead in this tax haven. Just don't trip over presidential wannabes and reporters. They stack 'em high during election years.
Alaska is one of two states that has no sales or income tax. Yes, you read that right. Alaska has neither tax. It derives most of its revenue from oil and gas revenues and federal subsidies. In fact, check this: Alaska's Permanent Fund issues annual checks to each state citizen. The Fund was established from revenues from the Trans-Alaska Pipeline. But take note: the cost of living and prevalence of caribou is a lot higher in Alaska than pretty much anywhere you are right now. So do the math.
South Dakota's claim to fame is that it isn't North Dakota. It's also that state whose capital name we all got wrong on our geography tests in school. Like Wyoming, there's no income tax and a 4% sales tax, so you'll laugh your way to the bank, and we're pretty sure they have one. And you guessed it, the capital is Pierre.
Wyoming is not the place for dust-free living. Trust us. But if you're looking for a whiz-bang sales tax rate, they'll hook you up with a 4% sales tax and no income tax. So what if Jackson Hole is the only oasis in this state that has more tumbleweeds than citizens? With your newfound state citizenship, you'll finally have something in common with Dick Cheney, plus one of the lowest tax burdens in the nation.
Where else can you enjoy a nice sunset and dodge hurricanes on a budget? Florida, of course! They have no appetite for a state income tax and purposely keep a modest 6% sales tax. Whether you're moving in with grandma at Del Boca Vista, or pondering that Florida resident rate at Disney, the Sunshine State is open for business, and they'll gladly take yours. Also look for expanding property tax breaks for homeowners as the state recovers from the recent economic downturn.
Everything's supposed to be bigger in Texas, but taxes just ain't one of 'em, partner! Texas has no income tax and a 6.25% sales tax. It annually rated on of the most business-friendly states in the country. They pride themselves on cattle raised right, and oil rigs pumping Texas Tea. They even have two former president living it up under their sweet tax code. J.R. Ewing would be happy!
Washington is doing its part to keep taxes low for Bill Gates and you, too. There's no income tax and a modest sales tax of 6.5%. That means more money in your pocket for a Starbucks mocha grande and grunge bar crawls. Its border with Canada and with neighboring Oregon, which boasts a high income tax, keeps Washington State policymakers hopping to stay uber-competitive and the home of a lot of West Coast companies, like Microsoft and Amazon.com, and entry-point for Asian shipping.
Delaware may be small, but it's an awesome tax haven. Think about: no sales tax and a sliding scale on its state income tax. Makes all of the noxious fumes from the chemical companies worth it, right? Works for Joe Biden. They call it a tax haven for corporations: over half of all publicly traded companies are registered here because of easy filing and low fees. But generosity in the First State doesn't stop there. Watch for the state's individual income tax rate to continue to drop, as reductions in the rate are planned each year through 2014, giving it one of the lowest income tax rates in the nation, apart from those without an income tax at all.
Montana isn't just for rich guys looking for the seclusion of a trillion-acre ranch. If you enjoy snow drifts higher than your head, Montana's got no sales tax rate and a 6.9% income tax rate waiting for you. Not bad, if you're okay with Ted Turner for an occasional neighbor. But seriously, Big Sky Country is tax friendly and worth a look.
Colorado is like Montana for people who wear hemp. Colorado offers one of the lowest sales tax rates along with a 4.63% flat rate for income tax. If you're one of those with a penchant for singing John Denver songs in the shower, you may feel at home with a moderate tax rate and a Rocky Mountain High. Colorado's low-tax neighbor, Nevada, has forced the Centennial State to up its game in recent years, so watch for falling rates and boulders alike.
You can refer to our Best Places to Live report for real-time, up-to-date and interactive top 100 best and worst list of cities. The report is sortable, and it allows you to discriminate by the population as well as your preferred state.