The Race to Zero Income Taxes

Originally published on Substack. 

Politicians love to tell taxpayers the same story after elections: government needs more money, taxes have to go up, and families just need to pay more.

But states across the country are proving that story wrong.

The latest income tax map by Americans for Tax Reform shows a major policy shift happening in real time. More states are moving away from progressive income taxes and toward flatter, lower, and eventually zero income taxes. That matters because income taxes do two harmful things: they punish work, saving, investment, entrepreneurship, and success, and they give politicians permanent access to your paycheck.

That is the wrong relationship between citizens and government.

Government should have to justify what it spends. Taxpayers should not have to justify keeping what they earn.

How to Read the Map
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The ATR map below is useful because it shows more than today’s tax rates. It shows the direction states are moving.

Green states have zero income taxes. Yellow states have flat income taxes. Gray states still have graduated income taxes, where rates rise as people earn more. Striped states have passed legislation to eliminate income taxes over time, while other markings show states that have passed legislation to move to a flat income tax or where state leaders have endorsed income tax phaseouts.
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That distinction matters.

A state’s current tax rate tells you where it is today. But triggers, phaseouts, and flat-tax reforms tell you where the state is trying to go. And increasingly, the reform direction is clear: lower, flatter, simpler, and eventually zero!

The ATR map notes that states including South Carolina, North Carolina, Mississippi, Oklahoma, Indiana, Kentucky, West Virginia, Georgia, Ohio, Kansas, Idaho, Utah, and Montana have recently cut rates, moved toward flatter structures, or adopted triggers that keep pressure on future tax relief. And state leaders in multiple states have endorsed income tax elimination, showing that this is no longer a fringe idea. It is becoming a serious governing strategy.

Income Taxes Punish Prosperity

Income taxes are among the most destructive taxes because they fall directly on people’s productive activity.

Work more, and government takes more.

Earn more, and government takes more.

Save more, invest more, build more, and take more risks, and government takes more.

That is bad economics and bad moral reasoning.

A state should want more work, more entrepreneurship, more investment, and more upward mobility. Yet income taxes penalize all of those things. They tell families, workers, and employers that success is a revenue source for politicians.

That is why the long-run goal should be clear: no income tax!

Flat taxes are better than progressive taxes because they are simpler and less punitive at the margin. Lower rates are better than higher rates because they reduce the penalty on work and investment. But the North Star should be zero.

The Momentum Is Real

The momentum is not happening in just one state.

Mississippi passed legislation to reduce its individual income tax to 3 percent by 2030 and then continue toward zero if fiscal conditions are met. Oklahoma reduced its rate and created a path toward further reductions. Indiana cut its flat tax and created future trigger-based reductions. Kentucky has been moving down through a flat-tax trigger model. Georgia has been reducing its flat rate. Ohio moved toward a flatter, lower structure. South Carolina moved toward a lower-rate system with potential future reductions.

This is the tax competition model working.

States are watching each other. Lawmakers are learning from each other. Taxpayers are asking why their own states cannot do the same.

And they should.

But Tax Cuts Alone Are Not Enough

Here is the part too many tax-cut conversations miss: most states are still spending too much.

That is where the ATR Sustainable Budget Project is essential. ATR updated its data through FY 2025 and compares state spending to a simple benchmark: population growth plus inflation. That benchmark reflects the average taxpayer’s ability to pay for government. If spending grows faster than population growth plus inflation, government is growing faster than taxpayers can reasonably afford.

And the results are sobering.

From 2016 to 2025, aggregate state spending, excluding federal transfers, rose 65.8 percent, while population growth plus inflation rose only 32.4 percent.

Had states held spending to that sustainable benchmark, they would have spent $419 billion less in 2025 and $1.8 trillion less cumulatively over the decade.
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ATR also reports that state spending grew at an average annual rate of 5.3 percent, compared with 3.0 percent for population growth plus inflation.

That is the bigger issue.

The problem is not that taxpayers are undertaxed. The problem is that government overspends.

Only a Few States Show Real Restraint

ATR’s Sustainable Budget Project found that only eight states kept their budgets below population growth plus inflation in at least one key category. Just Colorado, North Dakota, and Texas kept both state funds and all funds spending growth below the benchmark over the decade. Five more states, Iowa, Louisiana, Mississippi, Ohio, and Oklahoma, kept state funds growth below the benchmark but not all funds.

That means the vast majority of states, including many states moving in the right direction on tax reform, still have a spending problem.

This is why income tax elimination must be paired with spending restraint.

Otherwise, lawmakers will simply cut one tax, keep spending too much, and later raise another tax. That is not tax reform. That is tax shifting.

Economic Freedom Wins

The income tax movement also connects to a bigger story: economic freedom.
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The Fraser Institute’s Economic Freedom of North America 2025 report measures the degree to which governments allow people to make their own economic choices.

It finds that from 2014 to 2023, population in the freest U.S. states grew nearly 18 times faster and statewide personal income grew nine times faster than in the least-free states.
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That is not random.

People chase opportunity. Workers chase better job markets. Families chase affordability. Entrepreneurs chase places where success is rewarded instead of punished.

States with lower taxes, restrained spending, and lighter regulatory burdens tend to create better environments for people to prosper.

The Opposition Knows This

The political class understands what is at stake.

Government unions, left-wing activists, and defenders of big government know that if more states eliminate income taxes successfully, taxpayers everywhere will ask the obvious question:

Why are we paying so much?

That is why these reforms face so much resistance.

The fight is not really about one rate or one bracket. It is about who controls the future: taxpayers or government.

The political class prefers permanent revenue. Taxpayers deserve permanent relief.

The North Star

The best path is straightforward.

First, cap spending growth to less than population growth plus inflation. Second, use excess revenue (surpluses) to buy down income tax rates. Third, broaden the tax base by eliminating carveouts instead of raising rates. Fourth, use triggers that continue reducing income taxes until they are gone. Fifth, protect taxpayers from backdoor tax hikes through property taxes, fees, and hidden regulatory costs.

That is how states can move from progressive taxes to flat taxes, from flat taxes to lower rates, and from lower rates to zero.
Income tax elimination is not reckless when spending is restrained. It is reckless to keep spending too much and demand that taxpayers pay more forever.

Three Takeaways for Policymakers

1. Income taxes punish prosperity.

They penalize work, saving, investment, entrepreneurship, and success. States that want more opportunity should move toward flatter, lower, and ultimately zero income taxes.

2. Spending restraint must come first.

The ATR Sustainable Budget Project shows most states are spending faster than population growth plus inflation. Tax cuts will last only if lawmakers control spending.

3. Economic freedom is the competitive advantage.

The Fraser Institute shows freer states grow faster. Lower taxes, restrained spending, and lighter regulatory burdens attract people, income, jobs, and investment.

The Bottom Line

The race to zero income taxes is one of the most important state policy movements in America.

It says government should not have first claim on your paycheck. It says work should be rewarded, not punished. It says states should compete to attract families, entrepreneurs, and investment. And it says taxpayers are tired of being told government must always grow while their own budgets get tighter.

But tax reform without spending restraint is a mirage.

The states that win will be the ones that cut taxes, restrain spending, and expand economic freedom together.

That is how states let people prosper.

Thank you for reading and for sharing my work. If this added value to your week, please pass it along to a policymaker, staffer, journalist, or friend who should read it. Through Ginn Economic Consulting, I am glad to help policymakers, organizations, and leaders think through tax reform, spending restraint, competitiveness, and broader pro-growth policy that lets people prosper.