You know that New Hampshire recently became an even brighter beacon of freedom in New England by eliminating its last individual income taxes on interest and dividend income. The Wall Street Journal’s editors explain that New Hampshire and other states run by Republicans are widening the divide between themselves and the high tax states like California and New York. The editors write:
Start with New Hampshire, which eliminated its 5% tax on dividends and interest income, thanks to Gov. Chris Sununu and the GOP Legislature. The Live Free or Die State already had no income tax on wages. The lack of a levy on investment income will make the state even more of tax refuge in the Northeast. Look for more migration from Massachusetts, which abandoned its flat tax in 2022 to enact a 9% top income-tax rate and is Taxachusetts again.
Dozens of other state tax changes took effect in the New Year, including new flat rates on income. Iowa enacted a 3.8% income-tax rate for all—the culmination of Gov. Kim Reynolds’s six-year campaign to cut the top rate from 8.98%. First-term Louisiana Gov. Jeff Landry signed a flat tax last month, dropping that state’s income-tax rate to 3% from 4.25%.
Some states that already had flat taxes are lowering them in 2025. That includes Mississippi, which dropped its rate to 4.4% from 4.7%, and North Carolina, which cut to 4.25% from 4.5%. The Tar Heel State, which has boomed since cutting taxes in 2014, will further reduce the income rate to 3.99% in 2026. The GOP Legislature enacted the cuts without the approval from Democratic Gov. Roy Cooper, who fancies himself a presidential candidate.
These moves mean 14 states now have a flat tax, up from nine in 2021. Each of these states encourages work by declining to take a larger share as residents climb the income scale. It also helps enforce spending discipline. Applying a single rate to everyone raises the political cost of increasing taxes in the future, which is why public unions favor progressive rates.
The trend is more encouraging if you include the eight states that don’t tax income at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Wyoming. Washington state still doesn’t tax wage income, but Democrats passed a 7% tax on capital gains in 2021, and soon to be ex-Gov. Jay Inslee wants the state to impose a tax on wealth.
The no-income-tax and flat-tax states now add up to nearly half the states. Left behind are most of the Northeast and West Coast, where public unions dominate state government and drive an ever-higher tax ratchet.
On Sunday and despite widespread public opposition, New York—with a top income-tax rate in New York City of 14.8%—imposed a new “congestion tax” on vehicles entering Manhattan’s business district. The revenue grab will supposedly improve the city’s declining mass transit system, but look for it to pad transit union wages and benefits instead. The progressive tax ratchet never ends.
Action Line: You can choose where you live in America. The federal system is working. People are going where their money is treated best. Click here to subscribe to my free monthly Survive & Thrive letter.
