Move over South Dakota, Here Comes Another State with No Income Tax
It was 75 years ago that South Dakota took the drastic measure of eliminating state income taxes for its residents. All these years later the Mount Rushmore State is still one of just a few states to waive income taxes.
But that list is about to grow by one.
Over the next three years, Tennessee is phasing out its state income tax, falling from three percent to two percent next year, down to one percent in 2020, before hitting zero in 2021.
When that finally happens, the Volunteer State will take its place alongside the Mount Rushmore State and these six states with no state income taxes:
South Dakota's decision to move away from an income tax dates back to action taken by the 1943 legislature, which became retroactive to the end of 1942.
State leaders were hopeful that reducing the tax burden on residents would spur more migration to South Dakota by both businesses and companies, especially with the end of World War II just a few years away.
There have been attempts to bring the state income tax back in South Dakota and it would have happened in the 1970's if it wasn't for the vote of then-Lieutenant Governor William Dougherty, who cast a tie-breaking ballot in the State Senate, defeating a proposal to reinstate the tax.