In recent days President Trump again floated an intriguing and popular idea: cutting way back on, or even eliminating, the federal income tax. A quiet rebellion has already been brewing at the state level with some states slashing or even scrapping their income taxes, promising bigger paychecks, booming businesses, and a magnet for population growth. It may not exactly be a tea party revolution but proponents say state tax cuts are a growth engine that’s helping to reshape America’s map.

The following is a transcript of a report from “Full Measure with Sharyl Attkisson.”
Watch the video by clicking the link at the end of the page.

Arizona reports remarkable results since changing in its taxing strategy. Republican State Senator J.D. Mesnard was a key architect of Arizona’s flat tax: where everybody now pays the same low rate.

Sharyl: What year did Arizona enact the flat tax?

J.D. Mesnard: So it was 2021.

Sharyl: And what would you say has been the tangible impact since then?

Mesnard: As Arizona has continued to be a place folks have talked about doing that just moved us that much further up the ranks.

Arizona once had a progressive taxing system like the federal income tax: the more you made, the greater percentage of your income you have to pay.

Mesnard: When I got into office 15 years ago, one of my goals was to try to collapse that, simplify that, and then one day, maybe start ratcheting it down closer to zero. And a few years ago we had the ability to in fact achieve that. We collapsed our all five brackets first into four and then, into one, which was actually below the lowest rate that we had. Two and a half percent was phased in over a couple of years. Huge tax cut. But also this major tax reform that I and others have been fighting for a very long time. So now we have the lowest flat tax of any state in the country.

Lowering state income taxes or eliminating them altogether has become a popular trend.

Sharyl: Do you know what states have the highest income tax?

Jared Walczak: Yeah, the highest top rate of estate income tax is 13.3% in California for high earners. And then there’s a general payroll tax, not for UI, that makes it 14.4% on wage income. So that’s the highest you can get at the state level.

Jared Walczak is with the Tax Foundation, a nonprofit backing simple, transparent tax codes.

Walczak: If you want to combine state and local, then New York City is going to get you the highest, you’re going to get about 14.77%.

Sharyl: And then obviously adding that to the federal income tax.

Walczak: Yes, these are very high rates.

Today: There are nine states with no regular income tax on wages. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Walczak says 28 states have reduced income tax rates since 2021.

Walczak: Really the pandemic seems to have been a tipping point where a lot of states were flush with cash, they had an opportunity to make reforms and they were asking where do we want to do that?

Sharyl: What about Covid made states awash in cash? Was it the federal funding that they were getting?

Walczak: There’s a variety of things. We had a very long period of economic growth We had the Tax Cut and Jobs Act, which was a significant tax cut at the federal level, but it broadened the base and lowered the rates. So a lot of states were already primed to cut their rates, but then during the pandemic you did have some of the temporary relief. And a lot of states were looking at ways to return some of that to the taxpayer.

States implementing fresh cuts this year include: Alabama, Georgia, Hawaii, North Carolina, and South Carolina. Arkansas, Iowa, and Montana are phasing in lower rates. Mississippi and Oklahoma are phasing out individual income taxes entirely over time.

The no-tax states have long touted their edge: Florida and Texas draw retirees and tech firms with promise of people being able to keep more earnings.

Taxpayer: I live in Vancouver, Washington. And as far as the state income tax, we don’t have a state income tax.

Taxpayer: Depending on what the cuts would be if you could make appropriate cuts and reduce the income taxes that would be great.

Taxpayer: I think the state could eliminate state income taxes if they tried and went to more of a purchase type of tax like a flat tax on goods and products and stuff like that.

Taxpayer: Listen all I know about that is that I pay a lot of taxes.

Cutting the federal income tax is also popular. President Trump’s “One Big Beautiful Bill” delivers on average $3,752 in cuts per taxpayer by extending tax cuts from Trump’s first term, adding no-tax-on-tips, and more, totaling $4.5 trillion in relief over a decade. The law also lowers the tax brackets and doubles the standard deductions.

Sharyl: What is the highest individual income tax rate right now at the federal level?

Walczak: 37%.

Sharyl: Do you see any serious possibility that the federal income tax would be reform, changed, drastically reduced or done away with?

Walczak: Not done away with. Usually even when simplification is the goal, policy makers end up making it more complicated. But certainly we’ve seen changes. When you look at what the rates used to be in the World War II era, there was a top rate of around 90% .Until the Reagan administration there were, you know, top rates well over 50%. So we’ve seen a lot of relief. But the individual income tax for federal purposes is likely with us for a long time.

Walczak says there can be a downside to shrinking taxes. States can get in trouble if they reduce taxes without a full plan.

Walczak: So Mississippi would be an example of a state that was looking at full-fledged repeal of their income tax a couple of years ago in what I thought was an unbalanced manner. I went down and testified before the state senate and said, “you don’t have a responsible plan to do this. The alternative revenue streams that you’re talking about are inadequate.” And they ended up scaling that down, making a much smaller reduction. And now they have some triggers that if the revenues are there, if they have the opportunity, they will continue to reduce their rate and maybe go to zero someday. But it wasn’t that cut in one fell swoop and I think that would’ve been irresponsible.

Some skeptics claim no-tax states simply charge higher sales taxes hitting low-income families hardest.

Sharyl: I’ve long heard the argument that, ‘Oh yeah, state X or Florida for example, may not have an income tax, but they stick it to you in other ways. So you’re still paying the same amount.’

Walczak: You’re not paying the same amount, you are paying less. It’s certainly true that taxes may be higher, that in a state like Texas for instance, property taxes are higher than they are in the average state. On net, you’re still paying way less in taxes as a household in Texas than you are in most other states. That’s true of Florida as well and Tennessee as well and New Hampshire and all of these other states. Yes, if you’re in Tennessee, your sales taxes are high. But if you add up all of your taxes, you’re paying way less in those states.

Sharyl: Is doing away with eliminating or reducing state income tax more popular among Democrats or Republicans when you look at party?

Wolczak: I’d say Republicans have overwhelmingly been those talking about elimination, but both parties talk about relief. You can find Democratic governors who have championed rate relief. You’re probably not going to find as much interest in full elimination, because Democrats may dislike the pay-fors a little more or like some of the revenue potential of the income tax. Although that’s not universal. In Colorado, for instance, the Democratic governor there has said that while he doesn’t currently have a plan for it, he’d love to repeal the income tax someday. So you see it on both sides, at least to some degree.

There’s evidence that tax cuts are helping reshaping America’s map. Data shows that states reducing taxes since 2021 have seen faster revenue growth and increasing population. That includes Arizona.

Mesnard: After we passed the flat tax that we did, I did get a number of calls from legislators in other states. When I was sharing our success with them, part of me was thinking, ‘but I don’t want you to compete with us too much ’cause you know, we we’re having success here,’ but I obviously love to see other states be successful.

Sharyl (on-camera): Illinois recently decided to continue taxing tips at the state level even though they are now exempt at the federal level under President Trump’s reforms.

Watch video here.