“Taxachusetts” is what “Shark Tank” star Kevin O’Leary calls his old home state of Massachusetts.
High taxes are what ran him out of the state, prompting him to move to the Miami Beach, FL, area where there are no state income taxes.
“I left ‘Taxachusetts,’” O’Leary said on Fox Business. “I moved to Florida. Most of my neighbors where I live are all from hometown Boston and we can’t afford to live there anymore.”
(Christopher Willard via Getty Images)
In 2022, Massachusetts increased state income taxes from 5% to 9% for anyone making a million dollars or more per year. This helps explain why so many people in high-tax states like Massachusetts are moving to tax haven states such as Florida.
(Getty Images)
States with no state income taxes
The nine states that have no state income taxes are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
While those states don’t collect taxes, their residents aren’t necessarily saving more cash in the long run.
“States with no income taxes may be not as affordable [as] one would think,” says Realtor.com® senior economist Ralph McLaughlin.
Insurance rates skyrocket
In Florida, home insurance costs have gone up substantially due to the risk of property damage from hurricanes.
Real estate adviser Nicole Brown, from Sarasota, FL, says that due to the natural disasters, insurance rates shot up 40% in the state from 2022 to 2023 alone.
Real estate agent and attorney Bruce Ailion, of Re/Max Town & Country in Atlanta, says he grew up in Fort Lauderdale, FL, and has considered purchasing oceanfront property there—but the high insurance rates are a big reason he decided not to do so.
“The ability to buy in states with complicated insurance environments, such as Florida, is very much on the top of our clients’ minds,” says Saddat Abid, senior property buyer and CEO at Property Savior. “High insurance costs and the near-term possibility of uninsurability because of climate risk have been strong deterrents.”
Finance guru Suze Orman recently canceled the insurance policy on her 2,100-square-foot condo in Florida due to out-of-control prices.
“I’m not paying $28,000 a year when the insurer will probably contest any claim I get anyway,” Orman told the DailyMail.com. “Luckily, I have the money to self-insure.”
Last summer, Farmers Insurance announced that it wouldn’t be offering any home, auto, or umbrella policies in the state of Florida, which affected about 100,000 customers.
Special assessment fees skyrocket
After the June 2021 collapse of a Surfside, FL, condo building, which killed 98 people, Florida passed a structural safety law.
Now, buildings must pass structural inspections no later than 30 years after they are built, according to the Wall Street Journal.
As a result, many condo owners are being saddled with astronomical special assessment fees, some of which cost $100,000 or more.
(Getty Images)
Sales taxes spike
States that do not have state income tax might have other drawbacks.
“States that have no income tax will need to make up for lost revenue in other ways, which may be from a combination of higher property and sales taxes,” McLaughlin says.
Higher sales taxes can help fund things like education, human services, and public safety.
Housing prices and property taxes increase
In the states with no state income taxes, there’s also been an increased demand for housing.
“Wealthy households may seek to establish residency in such states in order to avoid paying income tax,” McLaughlin says. “This would mean the state would have a wealthier population base, and a wealthier base tends to be correlated with higher home prices.”
When home prices rise, so do property taxes—and that’s just another expense hitting homeowners right in the pocketbook.
What low-tax states really cost you
Here’s a snapshot of the expenses people who reside in Florida typically pay, compared with the national average. Data is pulled from ATTOM Data Solutions, Insurify, the Tax Foundation, and the U.S. Census Bureau.
Below, the national averages:
State sales tax: Typically between 4% and 7%
Property tax effective rate: 1.10%
Average property tax: $2,690
Average home insurance per year: $2,377
Next, how the income-tax-free states stack up, arranged alphabetically:
Alaska
State sales tax: 0%
Property tax effective rate: 0.95%
Average property tax: $3,947
Average home insurance per year: $1,116
Worth noting: Local sales tax—separate from state sales tax—can be as high as 7.5% in some areas.
Florida
State sales tax: 6%
Property tax effective rate: 0.76%
Average property tax: $4,476
Average home insurance per year: $10,996
Worth noting: This state has the costliest home insurance, if you can get it at all.
Nevada
State sales tax: 6.85%
Property tax effective rate: 0.48%
Average property tax: $2,660
Average home insurance per year: $1,224
Worth noting: Gambling gives Nevada significant revenue, so residents still get a fairly good deal taxwise.
New Hampshire
State sales tax: 0%
Property tax effective rate: 1.25%
Average property tax: $7,172
Average home insurance per year: $1,225
Worth noting: The state collects tax on dividends and interest.
South Dakota
State sales tax: 4.5%
Property tax effective rate: 1.01%
Average property tax: $3,408
Average home insurance per year: $2,562
Worth noting: The state collects sales tax on purchases (such as groceries) that are often exempt elsewhere.
Tennessee
State sales tax: 7.0%
Property tax effective rate: 0.44%
Average property tax: $1,695
Average home insurance per year: $2,470
Worth noting: This state also collects sales tax on purchases like groceries that are often exempt in other places.
Texas
State sales tax: 6.25%
Property tax effective rate: 1.20%
Average property tax: $4,464
Average home insurance per year: $4,456
Worth noting: The oil industry gives the state significant revenue.
Washington
State sales tax: 6.5%
Property tax effective rate: 0.80%
Average property tax: $5,640
Average home insurance per year: $1,437
Worth noting: The state charges a 7% tax on capital gains over $250,000.
Wyoming
State sales tax: 4.0%
Property tax effective rate: 0.53%
Average property tax: $2,930
Average home insurance per year: $2,159
Worth noting: The state charges sales tax on certain personal care items such as feminine hygiene products and diapers.
