How do states with no state income tax like Florida or Texas generate tax revenue? Do they have higher property tax or sales tax?

I compared their property and sales taxes with other states with income tax (such as Ohio or Virginia) and they are relatively the same.


3 Answers 3


You can find revenue breakdowns online, as this is generally all public information. It mainly only gets confusing depending on how the breakdown is done and the names given to them (e.g. sales tax, excise tax, ad valorem tax; are they all grouped together, or what?)


Here's some breakdowns of the 2004 state revenues. Approximately a third of their income comes directly from the Federal government (note that all states receive Federal funds; prosperous states, like Texas, pay more in taxes than they receive; though when I say this I do not account for direct payments to residents, such as Medicare and Social Security, only grants to the State itself). Of the non-Federal income, the biggest contributor is the sales tax, at about 40% of non-Federal income. Taxes on vehicles and fuel another 14%, and revenue from licenses, fees, permits, fines, and penalties is about another 14%. Texas also taxes the production of the oil industry, and has a corporate income tax (the "Franchise tax" you see in the link).


Nevada, better known as that place where Las Vegas is found, has an economy heavily dependent upon tourism, casino income in particular. A breakdown of their 2019-2020 revenue can be found here. Sales taxes and gaming revenues account for nearly 46% of non-Federal state revenue. Nevada's yearly budgets are currently in the rough neighborhood of $30 billion, about $10 billion of which comes from the Federal fund.


Florida is another tourism heavy economy, and they get in the neighborhood of an astonishing 80% of their non-Federal revenue from sales taxes; about a third of the state budget comes from the Federal fund. All property taxes in Florida are, per the state constitution, reserved entirely for local governments.

  • 5
    Florida has a 5.5% corporate income tax. stateofflorida.com/taxes/…. So does Texas which calls its business income tax a "Franchise Tax". comptroller.texas.gov/taxes
    – ohwilleke
    Apr 20, 2021 at 19:41
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    interesting, so Florida and Nevada are tourist heavy, and Texas gets sort of 'welfare payments from Fed heavy'? Also, you gave the wrong link : ) check the link for "2004 state revenues", I see this skyatnightmagazine.com/space-science/… anyways, I wonder why California needs high taxes, they could rely on tourism and welfare payments? who knows, thanks for the info, maybe we can compare to why California and New York need high taxes, when they are tourist heavy, strange
    – user38056
    Apr 20, 2021 at 20:44
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    @mattsmith5 California is a victim of Prop 13 which decimated local revenues from property taxes. One consequence of that is that local budgets need to be supplemented by revenues from the state general fund which gets supplied mostly through state income taxes and sales taxes.
    – Don Hosek
    Apr 21, 2021 at 3:15
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    @Don Hosek: One could equally well say that California is a victim of excessive government spending. In 2017, it spent $6,676 per capita, vs Florida's $3,838 and Texas' $4,392. (Per ballotpedia.org/Total_state_government_expenditures )
    – jamesqf
    Apr 21, 2021 at 3:33
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    @mattsmith5 "Texas gets sort of 'welfare payments from Fed" I wouldn't call these 'welfare payments' when you consider where the money from the Fed comes from, i.e. it comes from the peoples federal income taxes. So it is really just a portion of their taxes that are being returned by the feds, not welfare.
    – Glen Yates
    Apr 21, 2021 at 18:32

It will vary case to case, but there's a number of available revenue streams for U.S. states that have no income taxes (personal, corporate, or both):

Property taxes, as you suspect, are often higher but these are levied by municipalities and tend to make up for what would otherwise be funding flowing from the State-level government to the municipalities for things like schools, &c.

Sales taxes are also common, though some states (I live in Massachusetts, so New Hampshire is a perennial example here), have no sales tax.

Excise taxes are also common in one form or another. In the United States these are most commonly, gas taxes, tobacco taxes, alcohol taxes, and so on - these are assessed to the merchant, and so are invisible to the consumer which is why they're kept separate from sales taxes.

There's something called an 'excise tax' which is assessed to the consumer, and so isn't actually an excise tax, but instead a property tax, which is assessed on owned motor vehicles.

Down in the weeds there's stuff like license fees (hunting, fishing, driving, etc.), service charges (what you pay when visiting a state park to go camping, for example), estate taxes, property seized through civil forfeiture, abandoned property held in trust, and other financial esoteria.

Each state will address their budget in their own way, so which of these tools is used how much will vary.

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    Texas has high property taxes, and while those taxes are levied at the county level, the way they are spent effectively makes them a state tax. The biggest percentage of property tax goes the local public school district, but depending on where you live, much of that property tax may be diverted to other school districts in the state.
    – user100464
    Apr 21, 2021 at 16:00
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    There are also 'excise taxes' that are essentially just income taxes for businesses. Just because a state has no personal income tax doesn't mean it has no business income tax. For example, my state of Tennessee has no personal income tax, but does have an excise tax of 6.5% on all net business income.
    – reirab
    Apr 21, 2021 at 20:47

It's not clear exactly what you're asking here, but states without income tax do make less in income from taxes overall. E.g. (from Wikipedia)

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That graph is alas not per capita, but it's clear that CA made more even in that perspective compared to TX, as CA's population (around 39M) isn't twice that of Texas (28M or so), but CA's tax revenue practically was double that of TX, at least in the year considered there. Also NY state [with around 19M pop.] made more tax income than TX.

The Tax Policy Center has this calculated per year; their most recent figures are from 2017; CA had $6171 tax revenue pe capita; Texas $4161. So there's no free lunch for generating state income. It's also true that CA also spends more per capita than TX, about 50% more, according to ballotpedia, i.e. $6676 vs $4392.

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