No one likes paying income tax, but many people pay tax twice: once to the federal government and once to their state. Yet seven states have no state income tax, and two more are thinking about joining that group by eliminating their state income tax provisions.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the provisions that Georgia and South Carolina are discussing to get rid of their state income taxes. Dan notes that competitive pressure plays a factor in income-tax structures, with Georgia bordering both tax-free Florida and Tennessee, which has no income tax except on investment income, and South Carolina located close to both of those states. But Dan goes on to discuss the concerns that some have with the proposals, including the need to raise tax revenue from other sources or find spending cuts. Dan concludes that with so many distributional issues, it could be a while before either state actually pulls the trigger and eliminates state income taxes for good.
