Let's cut through the tax myths right away. You've probably heard whispers about states with no income tax and no sales tax like they're some kind of financial paradise. I used to dream about them too when I was drowning in taxes back in Chicago. But after actually living in two of these so-called "tax havens," I can tell you it's more complicated than social media makes it look. There's only one state that technically fits both bills - but hold that thought, we'll get there.
When I moved from Illinois to Alaska years ago, I thought I'd hit the jackpot. No state income tax? No state sales tax? Sign me up! But then reality hit when I saw my first $8 gallon of milk and got slammed with local sales taxes anyway. That's what nobody tells you upfront. This article isn't about tax fairy tales - it's about what actually happens when you chase the dream of zero income and sales taxes.
The Only State Without State Income Tax AND State Sales Tax
Alright, let's settle this. If you're searching for places with no income tax and no sales tax at the state level, Alaska stands alone. Here's how it breaks down:
| State | State Income Tax | State Sales Tax | Reality Check |
|---|---|---|---|
| Alaska | None | None | Local sales taxes up to 7.5% apply |
| New Hampshire | Taxes only dividends/interest | None | High property taxes compensate |
| Delaware | 2.2-6.6% brackets | None | Moderate income tax rates |
| Montana | 1-6.75% brackets | None | Tourist areas charge local taxes |
| Oregon | 4.75-9.9% brackets | None | Some of highest income taxes |
The tricky part? While Alaska doesn't charge state-level sales tax, local governments absolutely do. When I lived in Juneau, we paid 5% sales tax on everything. In tiny Hoonah (where I worked one summer), it was 6.5%. And since everything ships up there, prices are wild - $12 for a basic lettuce head isn't unusual.
You'll hear people say New Hampshire has no income tax and no sales tax, but that's only half true. They hammer you on property taxes instead. My cousin pays over $8,000 yearly for a modest house in Nashua. That's how states get you - they always find a way.
Local Tax Traps in Alaska
Here's what Alaskan local taxes actually look like in popular areas:
- Anchorage: 0% sales tax (but highest property taxes in state)
- Juneau: 5% sales tax
- Soldotna: 3% sales tax + seasonal taxes
- Valdez: 4% sales tax on goods, 8% on alcohol
Near-Miss States You Might Consider
Saying states have no income tax and no sales tax is mostly a fantasy. But these places come closest:
New Hampshire: The Almost Champion
No sales tax? True. No payroll income tax? Also true. But they nail you on:
- 5% tax on dividends/interest: Your investment income isn't safe
- Sky-high property taxes: Average $5,700/year vs national $3,500
- Room/meals tax: 8.5% on every restaurant meal and hotel stay
I road-tripped through New Hampshire last fall. Stopped at a diner in Concord - burger was $14 before the 8.5% meals tax kicked in. Felt like California prices without the weather.
Delaware: The Corporate Favorite
Zero sales tax makes retailers happy, but you'll pay:
- Graduated income tax: 2.2% to 6.6% depending what you earn
- Gross receipts tax: Businesses pass this to consumers
- Property taxes near coast: Up to $4,500/year in beach towns
Personal rant: Everyone talks about Delaware being tax-free, but forget they have the 6th highest average car insurance rates in the US. When I calculated total costs for a family of four moving from Pennsylvania, they'd save maybe $1,200 in taxes but pay $900 more in insurance. Doesn't add up.
The Hidden Costs Nobody Talks About
Thinking about states with no income tax and no sales tax? You absolutely must consider:
| Cost Factor | Alaska Reality | New Hampshire Reality | Impact |
|---|---|---|---|
| Groceries | 42% above US avg | 12% above US avg | Family of 4 spends $400-$800 more/month |
| Healthcare | 27% higher premiums | Average costs | Rural areas have doctor shortages |
| Utilities | Double national avg | Moderate | $400 heating bills common in AK winters |
| Transportation | Car dependency extreme | Moderate | Gas prices fluctuate wildly |
My brutal Alaska lesson? That no sales tax looks great until you're paying $4.89/gallon for gas during pipeline issues. Or when your furnace runs 24/7 through December and January.
Property Tax Swaps
States with no income tax and no sales tax don't exist without trade-offs. Here's where they get you:
- Texas: No income tax but property taxes average 1.6% (vs US avg 1.07%)
- Tennessee: No payroll tax but high sales taxes (7% state + local up to 2.75%)
- Nevada: No income tax but casino/gaming taxes inflate costs everywhere
See the pattern? There's always a catch. When governments cut one revenue stream, they open another faucet.
Who Actually Benefits from These Tax Structures?
After interviewing tax attorneys and people who've made the move, here's who comes out ahead:
- Remote workers earning coastal salaries: Tech worker from SF keeping $200k salary in Anchorage? Jackpot.
- Retirees with fixed incomes: No tax on social security in AK or NH helps stretch dollars.
- Business owners with pass-through income: Alaska's corporate structure protections are legit.
- Resource industry workers: Oil/gas jobs pay premiums that offset high costs.
But for average folks? Not so much. My neighbor in Wasilla was an EMT making $45k. After $1,800/month rent and $500 utilities, that no-tax benefit vanished. He moved back to Idaho after two years.
Financial Profiles That Get Crushed
- Lower-income families: Sales taxes hit hardest when every dollar counts
- People with medical needs: Alaska's healthcare gaps are no joke
- Anyone who hates winter: Seasonal depression is real during 18-hour nights
- City lovers: Anchorage feels like a big town, not a metropolis
Making the Move: Practical Survival Tips
If you're still considering states with no income tax and no sales tax (meaning Alaska with caveats), here's hard-won advice:
- Test drive the winter: Rent for January-February before committing. I saw so many "move to Alaska" dreamers bolt by March.
- Triple your moving budget: Shipping a car to Anchorage cost me $2,100 versus $800 to drive to Colorado.
- Job hunt first: Unemployment in rural Alaska is brutal. Have an offer in writing.
- Calculate total COL, not just taxes: Use MIT's Living Wage Calculator religiously.
- Consider "near misses": Tennessee has no income tax with moderate sales taxes and better infrastructure.
Must-Have Financial Cushions
Before moving to any state with no income tax and no sales tax implications:
- 6 months emergency fund (12 if heading to Alaska)
- Reliable vehicle with 4WD/AWD
- Home generator if outside major towns
- Evacuation fund for medical emergencies
Pro tip: Look at states offering relocation incentives alongside tax benefits. West Virginia pays remote workers $12,000 to move there - and they have lower property taxes than New Hampshire. Sometimes the "tax-free" label isn't the best deal.
FAQ: States with No Income Tax and No Sales Tax
Absolutely not. Every state generates revenue somehow. The closest is Alaska with no state income tax or state sales tax, but local sales taxes apply and they have high excise taxes on things like fuel and alcohol.
Only if you're in a high tax state currently AND have above-average income OR work in oil/gas. For middle-income families, the increased cost of living typically eats any tax savings. Run your specific numbers at Alaska's official cost calculator (commerce.alaska.gov).
They're half-truths. While NH has no sales tax and no tax on earned income, they have the 3rd highest property taxes nationally and tax investment income at 5%. Plus their business taxes get passed to consumers. My take? Great if you're a remote worker with equity, tough if you're starting out.
Plenty. Beyond local sales taxes (up to 7.5%), they have "sin taxes" on tobacco ($2 per pack), alcohol ($12.80 per gallon), and gas (14.66¢/gallon excise tax). Plus many municipalities charge seasonal taxes targeting tourists.
According to WalletHub 2023 data, Alaska ranks #1 for tax burden (5.18% of income), followed by Delaware (6.24%) and New Hampshire (6.84%). But "lowest burden" doesn't mean low costs - Hawaii has high taxes AND high costs, the worst combo.
The Final Verdict on Tax-Free Dreams
Chasing states with no income tax and no sales tax is like hunting unicorns - they don't really exist in pure form. Alaska comes closest, but local taxes and insane living costs create different headaches. After two years there, I realized tax optimization matters less than overall quality of life.
Look, if you're determined to pursue states with no income tax and no sales tax benefits, go in with eyes wide open. Spend time there off-season. Talk to locals at grocery stores. Calculate your specific break-even point. And remember - places like Florida and Nevada offer no income tax with manageable sales taxes and modern infrastructure.
In the end? I moved to Colorado. Taxes are moderate but roads get plowed, Amazon delivers next day, and I haven't seen $8 milk since leaving Alaska. Sometimes paying slightly more actually costs less.
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