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Some of the most affordable states in America are also leading the charge to cut individual income taxes. According to World Population Review’s 2025 Cost of Living Index, Oklahoma, Mississippi, West Virginia, Alabama, and Kansas have the five lowest costs of living in the country. Oklahoma ranks lowest at 86.0, followed by Mississippi at 87.3, West Virginia at 88.3, Alabama at 88.6, and Kansas at 88.8. With the national average sitting at 100, residents in all five states enjoy living costs considerably below the rest of the country.
Four of those five states are also working to make themselves even more taxpayer-friendly. Mississippi, Oklahoma, West Virginia, and Kansas have all enacted measures to limit government spending in order to deliver permanent income tax reductions as revenue comes in over the cap. In fact, Mississippi, West Virginia, and Oklahoma have enacted legislation to go all the way to zero. Rather than continuously expanding government spending to pay for handouts and bureaucrat salaries, these states are putting dollars back in the bank accounts of hardworking families and businesses.
Mississippi has taken one of the most aggressive approaches. In 2025, Governor Tate Reeves signed House Bill 1, which will gradually reduce the state’s individual income tax rate to 3% by 2030. Beginning in 2031, additional reductions can take place when certain revenue and reserve requirements are met, creating a pathway toward eventually eliminating the individual income tax altogether. The legislation also reduces Mississippi’s grocery sales tax from 7% to 5%, providing additional relief to residents of one of the most affordable states in the country.
Oklahoma is pursuing the same goal through a different mechanism. Earlier this year, Governor Kevin Stitt signed House Bill 4072, which created the Oklahoma Taxpayer Endowment Trust Fund using $200 million in existing state savings. The fund is intended to grow over time and eventually produce investment earnings that can help replace revenue now generated by the individual income tax. Rather than spend down its savings, Oklahoma is investing them to support permanent income tax relief.
West Virginia has similarly continued cutting its individual income tax. In March, Governor Patrick Morrisey signed another 5% across-the-board reduction for the 2026 tax year, lowering the state’s top individual income tax rate to 4.58%. This builds upon legislation enacted in 2023 that made West Virginia the first state to put itself on the path to zero income tax through revenue triggers.
Kansas has taken a more conditional approach through last year’s Senate Bill 269, which allows income tax rates to fall when state revenues exceed an inflation-adjusted baseline, and if the Budget Stabilization Fund remains sufficiently funded (holding at least 15% of general fund revenues). These reductions would first apply to the individual income tax until Kansas eventually reaches a flat 4% rate, at which point the corporate tax rate would also begin dropping to 4%. While the bill only applies to income tax revenue, many top Republicans hope to use the 2027 legislative session to expand the trigger to all state revenue, including sales tax, which would help keep spending down and allow the tax to drop more quickly over time.
Kentucky is another state working to reduce its reliance on the individual income tax. The state has gradually cut its flat income tax rate from 5% in 2022 to 3.5% in 2026, following pressure on Governor Andy Beshear by Republican supermajorities to sign House Bill 1 last year. Kentucky’s tax-cut framework requires certain revenue and reserve conditions to be met before lawmakers can enact additional reductions, with the statutory review process continuing until the income tax reaches zero.
While Kentucky sits outside the five most affordable states, its cost-of-living index of 92.5 remains well below the national average. The Bluegrass State is showing that maintaining and improving this affordability requires lawmakers to continue to find ways that let taxpayers keep more of what they earn.
Meanwhile, South Carolina has even more work to do. But lawmakers have recognized the problem and have taken significant action. Until recently, the state had the highest personal income tax rate in the Southeast, placing South Carolina at a competitive disadvantage against neighboring states with lower or no individual income taxes. This year, Governor Henry McMaster signed House Bill 4216, immediately cutting the top rate from 6% to 5.21% and creating a 1.99% lower bracket. Beginning in 2027, the top rate will continue dropping when individual income tax revenue grows by at least 5%, eventually bringing the overall rate down to 1.99%.
Once that happens, the same mechanism will begin reducing the remaining tax until South Carolina’s individual income tax reaches zero. With a cost-of-living index of 94.7, South Carolina is not yet among America’s most affordable states (while still in the 50th percentile), but lawmakers have created a clear path toward making the state more competitive by ultimately eliminating the income tax.
Although these states have taken different approaches, the principle remains largely the same: Limit state spending, and put extra money back into the hands of the people through permanent income tax rate reductions.
This becomes even more interesting when compared with the other end of America’s cost-of-living rankings. Hawaii has the highest cost of living in the country at 185.0, followed by California at 142.3, Massachusetts at 141.2, Washington, D.C. at 138.8, and New York at 125.1. These jurisdictions also impose some of the highest marginal individual income tax rates in the country:
- California – 13.3%
- Hawaii – 11%
- New York – 10.9%
- Washington, D.C. – 10.75%
- Massachusetts – 9%
Of course, high income tax rates alone do not explain why these jurisdictions are more expensive. World Population Review’s index measures expenses such as housing, groceries, utilities, transportation, and healthcare, and does not directly include state taxes in its calculation. Housing in particular accounts for a significant portion of the index.
But taxpayers do not experience these expenses in isolation. Housing, groceries, transportation, utilities, and taxes ultimately come out of the same paycheck, and higher taxes only add another expense for families already dealing with a higher cost of living.
This is where the approaches taken by Mississippi, Oklahoma, West Virginia, and Kansas become important. These states already maintain some of the lowest costs of living in the country, but lawmakers are not treating that advantage as an excuse to stand still. Instead, they are continuing to reduce the burden imposed on taxpayers and, in the cases of Mississippi and Oklahoma, working toward eliminating the individual income tax entirely.
States are constantly competing for workers, families, businesses, and investment. While lawmakers cannot directly control every factor contributing to the cost of living, they can control how much the state government takes from a taxpayer’s income. Lowering that burden allows workers to keep more of what they earn while making states more attractive places to live, work, and conduct business. States that cut taxes and keep them low are bound to see an influx of people, businesses, and capital seeking to flee the high cost of living (and similarly high taxes) of places like California and New York.
The affordable states of Mississippi, Oklahoma, West Virginia, Kansas, Kentucky, and South Carolina are all moving in the right direction. Their approaches may differ, but each recognizes that growing government revenues should create an opportunity for tax relief rather than another excuse for higher spending. Other states should follow their lead by controlling spending, reducing their reliance on individual income taxes, and allowing taxpayers to keep more of their hard-earned money.