As of 2025, more U.S. states are reevaluating income tax policies to stay competitive. While states like Florida, Texas, and Nevada have long operated without personal income taxes, others are now adopting similar strategies to attract residents and businesses. Many of these efforts also include broader tax reforms aimed at boosting disposable income and simplifying tax codes.
This list highlights ten states implementing or proposing major income tax changes—and explores how they stand to benefit by following the path of their no-income-tax peers. The selection is based on data from the Tax Foundation’s 2025 State Tax Competitiveness Index, which ranks states on the fairness and efficiency of their overall tax systems.
Wyoming
Ranked 1st overall on the STC index, Wyoming has long stood out as a state with no individual or corporate income taxes. This tax-free status continues to make it attractive to both residents and businesses. In 2025, the state strengthened its tax-friendly stance through Senate File 69.
This legislation offers a 25% property tax reduction on the first $1 million of a home’s fair market value. These additional breaks increase disposable income and support local economic activity.
North Carolina
North Carolina has reduced its individual income tax rate from 4.5% to 4.25%, with plans to lower it to 3.99% after 2025. It also cut the corporate tax rate from 2.5% to 2.25% and aims to eliminate it by 2030.
Some lawmakers support these changes to maintain competitiveness, while others express concern over potential revenue loss. The average worker may save about $131 annually under the current reductions.
Missouri
Lawmakers in Missouri approved significant tax reforms aimed at stimulating economic growth and attracting investment. House Bill 798 proposes a gradual reduction of the state income tax rate from 4.7% to 3.7% over the next decade, contingent upon annual revenue growth of at least $175 million.
The bill also includes reductions in corporate income tax rates and the elimination of taxes on capital gains income from the sale of assets. These measures are projected to reduce state revenue by approximately $1.3 billion once fully implemented.
Iowa
Lowa’s tax system reflects ongoing reforms aimed at enhancing its competitiveness. Iowa transitioned from a graduated income tax system, with a top rate of 5.7%, to a flat tax rate of 3.8%. This change aims to simplify the tax code and potentially attract new residents and businesses seeking a more favorable tax environment.
Lower tax rates can encourage job creation and investment, as businesses may relocate or expand operations in a state with reduced tax burdens. Residents will also benefit from higher take-home pay, allowing for increased consumer spending, which can further stimulate the local economy.
West Virginia
West Virginia implemented a 2% personal income tax reduction, supplementing a previously scheduled 4% cut triggered by economic performance metrics. Additionally, the state introduced a $225 non-refundable child care tax credit, benefiting approximately 16,000 families.
These measures are designed to increase disposable income, encourage consumer spending, and attract new residents and businesses seeking a favorable tax environment.
Georgia
Georgia has transitioned to a flat individual income tax and is gradually reducing the rate, aiming for improved tax competitiveness. House Bill 111 accelerated the state’s transition to a flat income tax rate, reducing it from 5.39% to 5.19% for the 2025 tax year.
This change is projected to save taxpayers approximately $870 million. Additionally, the corporate income tax rate was aligned with the personal rate, decreasing from 5.75% to 5.39%, with further reductions planned.
Mississippi
Mississippi lowered its flat income tax rate from 4.7% to 4.4% in 2025. Mississippi’s plan to phase out its state income tax by 2039 is expected to attract new businesses and workers looking for a lower tax burden. These efforts aim to draw new workers and businesses to the state.
The reduction in grocery taxes also helps lower-income families by making essentials more affordable. Infrastructure investments funded by adjusted gasoline taxes can further improve economic conditions by enhancing transportation and business logistics.
New Mexico
New Mexico has introduced several tax reforms to ease the financial burden on residents. House Bill 252 adjusted income tax brackets to benefit low- and middle-income earners. For example, a married couple earning $50,000 could save around $303 annually.
Another proposal, House Bill 275, seeks to eliminate individual income tax by setting the rate to zero starting January 1, 2026. However, this bill is still under legislative consideration and has not yet been enacted.
South Carolina
South Carolina lawmakers have proposed major income tax reforms to boost economic competitiveness. The plan aims to lower the current top income tax rate of 6.2% to a flat 3.99% by the end of 2026. Supporters believe this change will attract more residents and businesses.
They argue that reduced taxes can lead to higher disposable income and increased local spending. The proposal is part of a broader effort to make the state more appealing compared to its higher-tax neighbors.
Louisiana
Louisiana has implemented a flat individual income tax rate of 3%, replacing its previous graduated system. The standard deduction has increased to $12,500 for single filers and $25,000 for married couples filing jointly. These changes aim to simplify the tax code and provide financial relief to residents.
Lower corporate taxes and the planned repeal of the franchise tax make the state more attractive for businesses, encouraging financial investment. The streamlined tax structure also reduces administrative costs, making compliance easier for both individuals and companies.
