Houston and other non-taxed cities are reported to offer affordable living. There are nine states that have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Despite not having a state income tax, they may be subject to a tax on interest or dividends.

The affect of state income tax on homebuying was analyzed by the Houston Business Journal.

First, each state’s income tax rate for its average, unadjusted salary was taken and applied to that salary. Also, the rate that corresponded with the average salary for the market was examined. Next, the markets were categorized both by their average, adjusted taxed income and by their adjusted, untaxed income. Lastly, markets situated on state lines were omitted; this left 68 markets within income tax states.

From the highest paid market, Houston previously ranked No. 15. Houston has since raised eight spots and is currently at No. 7. Houston’s sister cities also improved: Austin, No. 23 to No. 10; Dallas, No. 24 to No. 19 and San Antonio, No. 61 to No. 42.

Markets without state income taxes averaged rankings 12 spots higher when ranked by average adjusted income rather than adjusted untaxed income. In comparison, markets with a state income tax averaged a four spot drop when considering taxes.

State income tax does not always guarantee a more affordable market than a state with an income tax.  Multiple factors impact affordability and cost of living like urbanization and the supply and demand characteristics of the local economy.