Full Measure After Hours: Eliminating State Income Taxes

Host: Sharyl Attkisson
Guest: Jared Walczak (Tax Foundation)
Date: December 11, 2025

Episode Overview

This episode explores the growing trend of U.S. states cutting or eliminating state income taxes. Host Sharyl Attkisson delves into why this movement is gaining traction, the economic effects for individuals and states, and the debates over whether elimination is feasible or sustainable. Guest Jared Walczak of the Tax Foundation provides expert insight on the tax policy landscape, the impact on state revenues and competitiveness, and real-world anecdotes from states that have reformed or abolished income taxes.

Key Discussion Points & Insights

Introduction: The Flat Tax and Tax-Cutting Momentum

• Sharyl previews her upcoming TV report on Arizona, which enacted the nation’s lowest flat tax (2.5%) after collapsing its income tax brackets (00:04–03:07).
• Definition of Flat Tax: "A flat tax means everybody who pays taxes pays the same percentage. So whether you're rich or middle income… everybody pays 5%. That's not how it is at the federal level or in many states." — Sharyl Attkisson [00:49]

Landscape: Which States Have No Income Tax?

• Nine states do not have a wage income tax; only Alaska has actually eliminated its tax entirely. Notable examples: Texas, Florida, Tennessee (03:13–04:02).
• These states actively promote their no-income-tax status to attract both residents and businesses.
  • Quote: "You have other states now that want to join them…to be a very low income tax state or even to eliminate income taxes altogether." — Jared Walczak [03:27]

The Pandemic Effect: Accelerating Tax Reform

• The pandemic was a “tipping point” for tax reform:
  • States received a windfall from economic growth, federal aid, and expanded remote sales tax collection (post-Wayfair decision), which left them "flush with cash" (04:10–05:59).
  • 28 states have cut income tax rates since 2021 — a historic pace.
  • Quote: "Economists have long talked about the competitive advantage of focusing less on income taxation and more on consumption taxes." — Jared Walczak [04:12]

Why States Want to Eliminate Income Taxes

• Lower income taxes are seen as a key competitive advantage for attracting jobs, businesses, and new residents (06:03–06:48).
• However, taxes aren’t the only factor — quality of life and amenities also matter.
  • Quote: “Job creators are more likely to create and expand in the states that have lower taxes.” — Jared Walczak [06:33]

The Practical Arguments Against Elimination

• Revenue replacement is the challenge — what other sources will make up for lost income tax receipts?
• Policymakers must balance tax cuts with maintaining vital services; doing it too quickly without a plan can harm the state (06:53–07:54).
  • Quote: “If you are just so set on eliminating the income tax that you will choose any replacement source of revenue, no matter what it is… that's not bringing people in.” — Jared Walczak [07:15]

Myth-Busting: “You’ll Pay in Other Ways”

• While states like Texas and Florida may have higher property or sales taxes, total tax burdens are still lower for most households than in states with income taxes (08:04–08:48).
• Quote: “If you add up all of your taxes, you’re paying way less in those states... also paying taxes that have fewer economic distortions.” — Jared Walczak [08:23]

Could Spending Cuts Replace Income Taxes?

• Some states have considered eliminating income tax and offsetting with spending cuts (Mississippi example), but unbalanced/reckless approaches are widely cautioned against (09:02–09:55).
  • Quote: “People want low taxes, but they also want a certain quality of life that they wouldn't have had if the government had been cut that dramatically.” — Jared Walczak [09:48]

Successes and Horror Stories

• Most states that cut income taxes since 2021 have seen revenues and in-migration rise.
• North Carolina’s tax reforms are highlighted as a model for economic turnaround [10:04–11:44].
• Kansas' "unbalanced" cuts became a cautionary tale, but most recent reforms have been success stories.
  • Quote: “You look at a state like North Carolina that a decade ago really reformed its system, cut income taxes…they turned their economy around." — Jared Walczak [10:41]

Highest State Income Tax Rates

• California: 13.3% (plus additional payroll tax = 14.4%)
• New York City: Combined state/local up to 14.77% (11:44–12:09)

What is the Tax Foundation?

• Explained as a nonpartisan think tank assisting policymakers and the public to understand tax policy and trade-offs (12:16–12:40).

Does the Tax Foundation Support Eliminating State Income Taxes?

• Not categorically — supports responsible, well-planned reduction or elimination where structurally feasible (12:44–13:24).
  • Quote: “We want responsible tax reform. We want it to stick. We don’t want someone to have to reverse it later.” — Jared Walczak [13:09]

Which States Are or Aren't Good Candidates?

• North Dakota could easily eliminate its income tax due to oil/gas revenues.
• Oklahoma is another possible candidate.
• For most states, elimination would need to be a gradual, “path” approach (13:31–14:07).

Is Federal Income Tax on the Table?

• Elimination highly unlikely; major reforms are difficult due to political complexity and special interests (14:18–15:13).
• The system has periodically changed, but full reform is rare.
  • Quote: “I think the income tax is with us for the long haul at the federal level.” — Jared Walczak [14:57]

The Politics of Federal Reform

• Lawmakers gravitate towards targeted deductions/credits over broad reform, which often complexifies rather than simplifies the tax code (15:21–16:49).
• Example: The cap on State and Local Tax (SALT) deduction under the Tax Cuts and Jobs Act—politicians focused on this narrow provision, ignoring broader cuts.

Notable Quotes & Memorable Moments

• “People, especially those who are more mobile, do want to go to lower tax states in many cases, and maybe even more importantly, people go where the jobs are.”
  — Jared Walczak [06:22]

• “If you add up all of your taxes, you’re paying way less in those states… You’re also paying taxes that have fewer economic distortions, which means they stand less in the way of growth.”
  — Jared Walczak [08:23]

• “Kansas try[ing] some really unbalanced cuts… that has poisoned a conversation. But… almost every state has had some sort of tax relief since then… and most of these really are success stories.”
  — Jared Walczak [11:18]

Timestamps for Key Segments

• [00:04] Sharyl introduces the episode & Arizona flat tax
• [03:13] Jared describes which states lack income taxes
• [04:10] How and why the trend accelerated post-pandemic
• [06:03] The "competitive advantage" of low/no income tax
• [07:54] Arguments against swift elimination; fiscal trade-offs
• [08:48] Spending-cut approaches vs. replacement revenue
• [10:04] Case studies: North Carolina & Kansas
• [11:47] Highest state income tax rates in the U.S.
• [12:20] What the Tax Foundation does
• [13:31] Which states could feasibly eliminate their income tax
• [14:18] Could the federal income tax be eliminated?
• [15:37] Political realities of federal tax reform

Conclusion

This episode provides a pragmatic, in-depth look at the national movement to lower or eliminate state income taxes. It weighs the promises (economic growth, migration, bigger paychecks) against the structural and political hurdles (necessary replacement revenue, political will, balanced budgets). Listeners gain a clear sense of where the movement stands, what has worked, and why careful, evidence-based tax reform is critical for long-term success.