Seven states have no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. (New Hampshire and Tennessee have no payroll income tax but tax earnings on interest and dividends.)

Of these seven, South Dakota is most like Maine, as its economy is driven by tourism and farming (I am including our fish and shellfish harvesting).

Although South Dakota has fewer residents, state spending is roughly the same per capita. So let’s compare it with Maine, using data.

South Dakota ranks ninth in business climate, versus 33rd for Maine. Property taxes are 38.7 percent of Maine tax revenue; in South Dakota, it’s 34.8 percent. Corporate taxes are 3.8 percent of Maine revenue; in South Dakota, it’s 2.1 percent.

Now the differences: Sales taxes are 17.3 percent of Maine revenue (39.6 percent in South Dakota).

Income taxes are 23.5 percent of Maine revenue (0 percent in South Dakota). Other taxes are 16.7 percent of revenue in Maine and 23.5 percent in South Dakota.

So taking the differences in total, we could very well eliminate the income tax if we mimicked the sales tax and other tax philosophy of South Dakota, as the total is 29.1 percent – some 6 percent higher than needed to cover the income tax source for Maine.

As far as the arguments we hear about income tax elimination favoring the rich, the counterargument is that the increased sales and other taxes will be and should be mostly composed of choice and “luxury” taxes. Instead of having no choice in the percentage of one’s income going to taxes, one would now have choices based on where and how much one wishes to spend.

South Dakota has retained a good credit rating and is consistently in or near the national top 10 in favorable financial ratings. Wouldn’t that be nice for us?

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