America's No Tax States Lead the Charge in the 2025 Tax Competitiveness Rankings

When deciding where to establish a business or call home, tax burden ranks among the top concerns. The Tax Foundation, a nonpartisan research organization, has released its latest assessment measuring state tax systems across multiple dimensions. Rather than oversimplifying the comparison, this comprehensive analysis evaluates each state using over 150 metrics spanning five key areas: individual income levies, corporate income taxes, sales and excise taxes, property and wealth taxation, and jobless insurance contributions.

The No Tax State Advantage

A striking pattern emerges from the data: states ranking in the top tier, particularly those in the top six positions, share one defining characteristic—many levy no individual income tax. Wyoming, South Dakota, Alaska, Florida, Texas, and Tennessee all occupy prominent positions on the list partly because residents face zero tax on wages and salaries. Yet this doesn’t automatically translate to affordability across the board. Jurisdictions without income taxes must compensate through alternative revenue streams, frequently relying on elevated property taxes or sales taxes to fund government operations.

The most tax-competitive states successfully balance multiple factors. They combine the absence or minimization of income taxes with comparatively modest sales taxes and property tax rates. According to the Tax Foundation’s analysis, “The elimination of a major tax source stands as a common thread among the highest-ranking states. While property taxes and unemployment insurance contributions exist everywhere, several leading states have strategically eliminated one or more significant tax categories—whether corporate income tax, individual income tax, or sales tax.”

Geographic and Economic Patterns

Wyoming, South Dakota, and Alaska—the top three no tax states—share similar characteristics. These states maintain relatively rural profiles with lower population densities, reducing the infrastructure costs that plague more urbanized regions. Without substantial demands for mass transit networks or extensive bureaucratic systems, policymakers can maintain lower overall tax burdens while still attracting business investment and new residents.

Natural resource-rich states gain additional leverage. Alaska and Texas, for example, generate substantial revenues by taxing extraction and energy production. This revenue stream decreases reliance on individual income taxation, creating a structural advantage in overall tax competitiveness.

The Complete Top 10 Breakdown

Wyoming tops the list with rank 1 for individual income taxes, rank 7 in sales tax, and rank 44 for property taxes.

South Dakota matches Wyoming’s individual income ranking at 1, ranks 31st in sales tax, and 10th in property taxation—demonstrating stronger property tax efficiency.

Alaska occupies the third position, sharing top-tier status for income taxes (rank 1), ranking 5th in sales tax, and 30th in property taxes. The state’s unique advantage includes zero sales tax burden.

Florida enters the top four with identical income tax ranking (1st) despite higher sales tax positioning (14th) and mid-range property tax rating (21st).

Montana ranks fifth with a 10th-place income tax ranking—its only weakness—but compensates with exceptional 3rd-place sales tax rating and solid 18th-place property tax standing.

New Hampshire positions itself sixth with a 12th-rank in income taxes and leads all states at 1st in sales tax competitiveness, though property taxes rank 39th.

Texas claims 7th place, achieving top-tier income tax status (1st) while ranking 36th in sales tax and 40th in property tax—a balanced approach.

Tennessee secures 8th position with perfect income tax ranking (1st), 47th in sales tax (significant disadvantage), and 33rd in property taxation.

North Dakota ranks ninth with modest 17th place for income taxes but demonstrates excellence with 4th-place property tax ranking and respectable 15th in sales tax.

Indiana completes the top ten with 16th-place income tax ranking, 17th in sales tax, and exceptional 5th-place property tax position.

The Tax Strategy Tradeoff

States occupying premium positions face important tradeoffs. Lawmakers prioritizing lower tax burdens often accept reduced funding for public services, infrastructure investments, and social benefits. Texas and Florida exemplify this approach—populous states that deliberately sacrifice revenue potential to maintain competitive tax environments.

The data underscores a fundamental principle: no state taxes absolutely everything equally. The highest-ranking jurisdictions have strategically chosen which tax revenue sources to minimize or eliminate, creating a distinctive competitive profile that attracts residents and business investment while maintaining acceptable service delivery levels.