Pre-Elimination Income Tax Rates

Three states have repealed taxes on individual income.

Individual income taxes (IITs) can be levied on an individual’s earned income, interest, and dividends. Earned income includes wages, salary, and other employment income (Internal Revenue Service (IRS) 2026). Interest comes from banks, bonds, and other lending, while dividends are paid by companies to shareholders (IRS 2025a, IRS 2025b).

Eight states (AK, FL, NV, NH, SD, TN, TX, WY) have no IITs. Of these, five (FL, NV, SD, TX, WY) have never taxed income (Drenkard 2014). The other three states (AK, NH, TN) have eliminated a previously established IIT.

AK repealed a tax on all individual income in 1980 (Cole 2004). Prior to repeal, the highest tax bracket, for income over $200,000, was taxed at 14.5% (Council of State Governments 1982). IIT was 18.5% of the state’s General Revenue (GR) in Fiscal Year (FY) 1978, but that share decreased as corporate tax revenue from oil companies increased (Cole 2004). The IIT was 3.8% of GR in FY 1980, the year before it was eliminated (Alaska Department of Revenue 1981).

NH and TN do not tax earned income. Both phased out taxes on individual income from interest and dividends (I&D). TN reduced the I&D tax rate by one percentage point (PP) per year, from 6% in 2015 to 0% in 2021 (TCA §67-2-102 2017, TN SB 47 2016). NH lowered the I&D tax by one PP per year from 5% in 2022 (NH HB 2 2021). The state updated the rate to 0% in 2025 (NH HB 2 2023). Before repeal, these taxes comprised 7.8% and 2.1% of GR in NH and TN, respectively (New Hampshire HB 1-A 2021, State of Tennessee 2018).

Three states are gradually reducing individual income tax.

KY, MS, and OK have triggers that automatically lower IIT rates based on annual revenue and appropriations. OK has four tax brackets and lowered the tax rate on income above $7,200 from 4.75% in 2025 to 4.5% in 2026 (OK HB 2764 2025). Income tax rates for each bracket will decrease by 0.25 PPs any year the state’s total revenue increases enough to offset the tax cut.

KY taxes all income at the same rate (KRS §141.020 2025). The state lowered the tax rate from 5% in 2022 to 4.5% in 2023 and created a trigger to lower rates based on the state’s revenue, appropriations, and Budget Reserve Trust Fund (BRTF) balance (KY HB 8 2022). The BRTF is a rainy day fund that can be filled with General Fund (GF) surpluses or direct appropriations (KRS §48.705 2009). The tax rate will decrease by 0.5 PPs in any year that:

• The state’s BRTF balance is at least 10% of the GF.
• The total GF exceeds the amount of GF appropriations by more than the cost of an IIT cut of 1 PP.

This mechanism lowered KY’s income tax rate to 4% in 2024 and 3.5% in 2026. In 2025, KY added conditions that would lower the tax rate by smaller increments if the previous conditions were not fully met (KRS §141.021 2025).

MS taxes all individual income over $10,000 at the same rate (MCA § 27-7-5 2025). The state began lowering the rate incrementally, from 4.7% in 2024 to 3% in 2030. Following this reduction, a similar trigger as in KY will lower tax rates between 0.2 and 0.3 PPs, if (MCA §27-7-5.1 2025):

• The working cash-stabilization reserve fund balance is 10% of the GF total.
• GF revenue exceeds appropriations by more than 0.85% of the cost of a tax cut of 1 PP.

IIT was less than half of general revenue in states with gradual repeals.

MO receives more of its GR from IIT than states that are reducing or have eliminated their income tax (Figure 1). IIT was 68% of MO’s GR in FY 2025 (Missouri Senate Appropriations Committee 2025). IITs in AK, TN, and NH were each less than 8% of GR prior to their elimination.

IIT comprises a larger share of GR in the states with tax cut triggers. In OK, IIT revenue comprised 37% of GR in FY 2024 and is a projected 36% in FY 2026 (Oklahoma Office of Management & Enterprise Services 2025). In KY, IIT revenue was 41% of total revenue in FY 2022, which gradually decreased to 34% in FY 2025 (Kentucky Office of State Budget Director (KY OSBD) 2025, KY OSBD 2024). IIT revenue was 33% of MS GR in FY 2024, and is 28% in FY 2026 (Mississippi Joint Legislative Budget Committee 2025).

Figure 1. Percentage of state general revenue from individual income taxes before and after repeal. Year 0 is the fiscal year before tax rate changes went into effect. AK (triangles) is the only state to fully repeal a tax on all income. NH and TN (squares) phased out taxes on interest and dividend income. KY, MS, and OK (circles) are gradually lowering tax rates based on revenue and spending. Data for MO (diamonds) is from FY 2024 through 2026. Dashed lines are projected changes.

References

Alaska Department of Revenue (n.d.) Revenue Sources Book and Forecasts. https://tax.alaska.gov/programs/sourcebook/index.aspx

Alaska Department of Revenue (1981) Revenue Sources FY 1980-82. https://tax.alaska.gov/programs/documentviewer/viewer.aspx?1432r

Alaska Office of the State Assessor (n.d.) Alaska Tax Facts. https://www.commerce.alaska.gov/web/dcra/officeofthestateassessor/alaskataxfacts.aspx

Cole TM (2004) Blinded by riches: The permanent funding problem and the Prudhoe Bay effect. University of Alaska Anchorage. https://iseralaska.org/static/legacy_publication_links/blindedbyriches.pdf

Council of State Governments (1982) The Book of the States: 1982-1983.  https://bookofthestates.org/past-issues/

Drenkard S (2014) When did your state adopt its income tax? Tax Foundation. https://taxfoundation.org/data/all/state/when-did-your-state-adopt-its-income-tax/

Florida Department of Revenue (n.d.) General Tax. https://floridarevenue.com/taxes/Pages/default.aspx

Internal Revenue Service (IRS) (2026) Earned income and Earned Income Tax Credit (EITC) tables. https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income-and-earned-income-tax-credit-eitc-tables

IRS (2025a) Topic no. 403, Interest received. https://www.irs.gov/taxtopics/tc403

IRS (2025b) Topic no. 404, Dividends and other corporate distributions. https://www.irs.gov/taxtopics/tc404

Kentucky H.B. 8, 2022 Kentucky General Assembly (KY 2022).  https://apps.legislature.ky.gov/record/22rs/hb8.html

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KY OSBD (2024) Commonwealth of Kentucky 2024-2026 Budget of the Commonwealth: Budget in Brief. Link.

KY OSBD (n.d.) Archives. https://osbd.ky.gov/Archives/Pages/default.aspx

Kentucky Revised Statutes §48.705 (2009) https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=22575

Kentucky Revised Statutes §141.020 (2025) https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=56339

Mississippi Code Annotated §27-7-5.1 (2025) https://advance.lexis.com/api/document/collection/statutes-legislation/id/6GCY-2XX3-RW8T-G47G-00008-00?cite=Miss.%20Code%20Ann.%20%C2%A7%2027-7-5.1&context=1000516

Mississippi Department of Finance and Administration (n.d.) Annual state appropriation budget bulletins. https://www.dfa.ms.gov/annual-state-appropriation-budget-bulletins

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Mississippi Joint Legislative Committee (2025) State of Mississippi Budget Bulletin, Fiscal Year 2026. https://www.lbo.ms.gov/pdfs/fy26_bulletin.pdf

Missouri Senate Appropriations Committee (2025) 2025 Annual Fiscal Report, Fiscal Year 2026. https://www.senate.mo.gov/25info/2025redbook.pdf

New Hampshire Department of Revenue Administration (n.d.) Taxes at a Glance. https://www.revenue.nh.gov/taxes-glance

New Hampshire H.B. 1-A (2021) https://gc.nh.gov/lba/budget/quickresults/hb1_searchable.pdf

New Hampshire H.B. 2, 2021-2022 New Hampshire General Court. (NH 2021). https://gc.nh.gov/bill_status/legacy/bs2016/billText.aspx?sy=2021&id=1080&txtFormat=html

New Hampshire H.B. 2, 2023-2024 New Hampshire General Court. (NH 2023). https://gc.nh.gov/bill_status/legacy/bs2016/billText.aspx?sy=2023&id=1081&txtFormat=html

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Oklahoma H.B. 2764, 60th Oklahoma Legislature. (OK 2025). https://www.oklegislature.gov/BillInfo.aspx?Bill=hb2764&Session=2500

Oklahoma Office of Management & Enterprise Services (2025) Executive Budget Historical Data FY 2026. https://oklahoma.gov/content/dam/ok/en/omes/documents/bud26hd.pdf

Oklahoma Office of Management & Enterprise Services (n.d.) Annual Budget. https://oklahoma.gov/omes/divisions/budget-policy-gaming-compliance/budget-and-policy/annual-budget.html

South Dakota Department of Revenue (n.d.) Individual Forms. https://sddor.seamlessdocs.com/sc/individual-forms/

State of Nevada Department of Taxation (n.d.) Tax Information for Nevada. https://tax.nv.gov/about-nevada-department-of-taxation/income-tax-in-nevada/

State of Tennessee (2018) The Budget Fiscal Year 2017-2018. https://www.tn.gov/content/dam/tn/finance/budget/documents/bgtdocsarchive/2018BudgetDocumentVol1.pdf

Tennessee Department of Revenue (n.d.) Taxes. https://www.tn.gov/revenue/taxes.html

Tennessee Annotated Code §67-2-102 (2016) https://advance.lexis.com/api/document/collection/statutes-legislation/id/4X8K-XKK0-R03N-H2DK-00008-00?cite=Tenn.%20Code%20Ann.%20%C2%A7%2067-2-102&context=1000516

Tennessee S.B. 47, 109th General Assembly. (TN 2016) https://wapp.capitol.tn.gov/apps/BillInfo/Default?BillNumber=SB0047&ga=109

Texas Comptroller of Public Accounts (n.d.) Texas taxes and fees. https://comptroller.texas.gov/taxes/a-to-z.php

Wyoming Department of Revenue (n.d.) Divisions. https://revenue.wyo.gov/

Washington State Department of Revenue (2025) Income tax. https://dor.wa.gov/taxes-rates/income-tax