Sometimes, and usually by less than the headline suggests. A state without an income tax still has to fund itself, and it almost always does so through property tax, sales tax, or both. Whether you come out ahead depends far more on how much house you end up in and how much you earn than on the absence of the tax itself.
- 9 states levy no tax on wage income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
- The saving is roughly proportional to your income, so it is worth far more to a high earner than to a median one.
- The offset is usually property tax, which scales with the home you buy rather than with what you earn.
- Renters keep more of the benefit than buyers, because property tax reaches them only indirectly through rent.
Every state raises the money somewhere
This is the part that gets skipped. A state with no income tax is not a state that needs less money; it is a state that has chosen a different instrument. The three main ones are income, property and sales, and states without the first lean harder on the other two.
It is worth being precise about this, because the popular version of it is wrong. The states with the very highest effective property tax rates are mostly not the no-income-tax states at all: New Jersey, Illinois, Connecticut, New Hampshire, and Vermont all levy income tax as well. High property tax is not evidence of a missing income tax.
The overlap that does exist is the interesting part. These states levy no tax on wage income and still sit in the top ten for property tax: New Hampshire and Texas. Texas is the one most people are asking about, at an effective rate of 1.49%, the 8th highest in the country.
Sales tax runs the same way. A handful of states levy none at all: Alaska, Delaware, Montana, New Hampshire and Oregon. They are mostly not the no-income-tax states either.
Who this actually helps
The income-tax saving scales with income. Someone earning three times the median saves roughly three times as much, while the property-tax offset depends on the house, not the salary. So the same move can be clearly worth it for one household and roughly neutral for another on the same street.
Renting changes the arithmetic again. A renter pays property tax only through what a landlord passes on, which is real but indirect and much less sharply felt than a bill arriving in your own name. If you are renting for the first year or two, you keep more of the benefit during exactly the period when a move is most expensive.
What it looks like on a real pair
California to Texas is the move this question is usually about, so it is the useful one to look at. The income line moves immediately and substantially. Then look at what comes back the other way.
Oregon to Washington is the sharper version of the same test, because the two are neighbours: Washington levies no tax on wage income and Oregon has no general sales tax, so the two instruments swap places almost cleanly.
What to check before you decide
Work out the income-tax saving on your actual income rather than on a median. Then price the property tax on the actual home you are considering rather than on a state average. Those two numbers together answer the question; nothing else moves it as much.
One thing worth knowing: a state can change this. Income taxes get introduced, phased out and restructured, and a decision that rests entirely on today's tax code is resting on something a legislature can move. If the move only works because of the tax, it is worth asking whether it still works if that changes.