(May 2023) Policy Foundation research concludes states without an income tax create new private-sector jobs at rates greater than the national average.

This observation is demonstrated by calculating growth rates in periods of economic expansion. The U.S. Bureau ofLabor Statistics (BLS) compiles jobs data. The National Bureau of Economic Research (NBER) determines expansion dates.

A 2003 Foundation research memo found “states with no income tax created private sector jobs at the greater rate than the U.S. average” in the 10-year expansion between March 1991 and March 2001. The Policy Foundation was founded in 1995. Private employment “in the nine states without an income tax grew 35.4% as a group” versus the U.S. average of 24.4%.(1)

The NBER found the next expansion occurred between November 2001 and December 2007.(2) Private employment in the nine states without an income tax expanded 11.6% as a group versus the U.S. average of 5.7%.

A May 2022 Foundation memo found three no-income tax states, including Texas and Florida had some of the highesttotal job creation rates in the expansion that lasted from June 2009 to February 2020. Private employment in the nine states without an income tax grew 27.5% as a group versus the U.S. average of 19.4%.

In sum, no-income tax states created private-sector jobs at higher rates than the national average through multiple business cycles.

Private Jobs Growth and the Current Expansion

The NBER found the current expansion started in April 2020. Through March of this year, private employment in thenine states without an income tax expanded 25% as a group versus the U.S. average of 22.5%.

Upon closer examination, four no-income tax states emerge as job creation leaders within their regions. These states are Nevada (43.8%) in the West, New Hampshire (25.6%) in New England, and Texas (23.5%) in the Plains. Inthe 12-state Southeast region, Florida (28%) is the leader as the following chart shows.

Florida 28.0%

South Carolina 24.921%

North Carolina 24.898%

Kentucky 24.5%

Georgia 23.7%

Tennessee 22.2%

Mississippi 20.5%

Alabama 19.5%

Arkansas 18.7%

West Virginia 17.9%

Virginia 17.548%

Louisiana 17.515%