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This Is the US State Most Likely to Evade Taxes

This Is the US State Most Likely to Evade Taxes

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Updated by Editorial Staff

Last Updated 23rd Jan 2025, 10:42 AM

This Is the US State Most Likely to Evade Taxes

“In this world nothing can be said to be certain, except death and taxes.” - Benjamin Franklin, 1789. And yes, the sentiment still rings true today, but believe it or not, there are plenty of people out there who think that they can beat the tax system.

Tax season is about to begin, running from the end of January until the 15th of April in most states. So it’s no surprise that many Americans are looking for a way to quite simply not pay the tax that they owe. Whether it's your full-time job, nixers, or casino site winnings, Uncle Sam wants his cut.

The biggest chunk of tax that most people have to pay is income tax. Federal income tax ranges from 10% to 37%, depending on the amount of money you earn. And most states also apply their own income tax, which is added to the federal tax.

Besides income, you have to pay tax on sales, property, and even casino winnings. Whether or not you have to file a tax return depends on factors like how much your income is and if you’re married, but in general, if you’re a US citizen or permanent resident and you’re in employment, you’ll probably need to pay some level of tax.

Tax evasion is a serious crime in the US, with the maximum penalty being five years in federal prison, a $100,000 fine, or both. Every year, billions of dollars are lost due to tax evasion, resulting in a major knock-on effect for the economy. From reduced government spending and increased taxes to erosion of public trust and unfair impacts on law-abiding businesses, you might be surprised at all the ways that tax evasion can affect you.

Which State's Have The Most 'Tax Avoidant' Residents?

And while the majority of Americans understand that tax evasion is unethical, only around 81% to 84% actually file their taxes voluntarily and on time. So, we decided to find out exactly where in the US tax evasion is most common.

By considering certain data, like the prevalence of searches for specific keywords, as well as migration, tax bands, and male-to-female ratio (males being more likely to evade tax), we were able to put together a ranking of which states avoid tax the most and the least.

So, which state is the most likely to avoid tax? According to our research, it’s Hawaii, with a super high rating of 92.5 on our index. The first reason for this might be because the state applies a graduated tax model—the more you earn, the more tax you pay. So it might feel like avoiding tax is an easy way to ensure that you walk away with more money.

State	Tax Band Score	Search Score Normalized	Migration Rank Normalized	Male Ratio Normalized	Tax Avoidance Index
Hawaii	100	100	100	50.1	92.5
California	100	75.8	95.9	44.4	81
Kansas	100	78.9	77.6	41	77.1
New Mexico	100	80.2	67.3	39.1	74.8
New Jersey	100	71.7	85.7	28.7	74.4
Oregon	100	82.4	61.2	40.4	74.3
Connecticut	100	75.2	79.6	25.9	73.8
Massachusetts	100	60.4	89.8	23.6	70.1
Missouri	100	90.9	36.7	29.1	69.9
Louisiana	100	56.9	87.8	24.8	68.4
New York	100	50.6	98	22.1	68.1
Nebraska	100	60.4	69.4	44.1	68.1
Maryland	100	59.7	83.7	18.9	67.7
Virginia	100	75.5	51	30.9	67.6
Iowa	100	65.4	55.1	45.6	66.8
Minnesota	100	59.4	57.1	47.1	65.1
Illinois	50	62.3	91.8	32.5	62.7
Ohio	100	58.5	59.2	28.9	62.5
North Dakota	100	35.8	65.3	66	60.6
Oklahoma	100	68.2	24.5	41.2	59.6
Wisconsin	100	54.4	42.9	45.2	59.3
Washington	50	70.4	53.1	50	58.9
Mississippi	50	61.3	81.6	15.4	57.2
Colorado	50	66.7	46.9	57.9	57.1
Utah	50	66	44.9	58	56.3
Pennsylvania	50	57.2	75.5	30.2	56.3
Maine	100	66.7	20.4	29.1	56.1
Vermont	100	26.1	73.5	45.1	55.6
Michigan	50	54.1	71.4	35.1	54.8
South Carolina	100	77.4	0	22.4	54.3
New Hampshire	100	54.7	22.4	43.6	54
Arkansas	100	61.3	18.4	29.8	53.6
West Virginia	100	46.5	30.6	43	52.7
Rhode Island	100	30.2	63.3	27.6	52
Indiana	50	60.7	49	35.7	51.9
Arizona	50	73	16.3	44.7	50
Georgia	50	69.8	34.7	21.9	49.9
Idaho	50	79.9	2	47.5	49.6
Alabama	100	59.1	12.2	16	49.1
District of Columbia	100	30.5	67.3	0	49
Alaska	0	26.1	93.9	100	48.9
Kentucky	50	57.5	38.8	35.9	48.1
North Carolina	50	71.7	6.1	22.2	43.5
Delaware	100	46.5	4.1	19.1	42.5
Florida	0	73.6	26.5	28.6	40.4
Texas	0	62.3	28.6	43.2	38.5
Nevada	0	66.7	10.2	53.6	37.3
Montana	100	9.1	14.3	57	35.8
Wyoming	0	41.8	40.8	56.3	35.4
Tennessee	0	59.4	8.2	26.6	29.8
South Dakota	0	0	32.7	57.3	16.8

Hawaii’s tax system is also quite regressive, which in this context means that people who earn less actually end up even worse off after paying taxes. Reasons for that include preferential rates on capital gains tax and a lack of child tax credits. With tourism being Hawaii’s largest industry, many people are paid in cash and simply don’t disclose the income when it comes time to pay taxes.

The second most likely state to evade taxes is California, which received a rating of 81. The state has some of the highest individual income tax rates in the entire country, as well as high sales taxes and property taxes. So, how do people in California evade tax?

One way is that they simply move out of the state before a major income event, for example, selling a property. But keep in mind that just because you don’t live in the state doesn’t mean you’re necessarily exempted from the taxes; even if you have rental property or freelance clients based in California, you’ll need to pay the appropriate taxes.

Third on the list is Kansas, with a rating of 77.1. The state currently has a graduated income tax, just like California and Hawaii, although the idea of a flat income tax model has been floated in recent years. Studies have shown that a move like that would mainly benefit the top 20% of earners, which might be a reason why so many people have been searching for terms related to tax evasion recently.

Top 5 US States Most Likely to Evade Taxes

You probably won’t be surprised at all to find out that states with no income tax come right at the bottom of our list. The state that’s least likely to evade taxes is South Dakota, with a ranking of 16.8 on the scale.

The state has no individual income tax and also no corporate income tax, so if you’re a resident of the state, you don’t need to file a state income tax return at all. It makes sense that South Dakota ranks so low on our list, in that case, because you can’t evade taxes if you don’t need to pay them in the first place!

If you live in a state with high taxes, this whole concept might sound completely foreign to you. How can a state collect money from its citizens without taxing their income? Well, it’s quite simple. South Dakota, for example, plugs the gap with sales taxes and property taxes, and other states with no income tax follow a similar model.

Second from the bottom of the list is Tennessee, which also has a 0% income tax rate. The state received a rating of 29.8 on our scale. Unlike South Dakota, Tennessee does have a corporate tax, which is set at 6.5%. The state also collects tax revenue via sales tax, which is around 9.55% on average. In fact, a large chunk of the state’s tax revenue comes from this relatively high sales tax.

Wyoming came third from the bottom with 35.4 and an income tax rate of zero. But how about states that do apply income tax? Well, fourth from the bottom of our list was Montana, which applies a graduated rate of tax but still only scored 35.8 on our scale. The state allows federal taxes to be deducted from your state income tax return, and there’s no sales tax, so overall Montana is quite tax-friendly.

Casino and Gambling Winnings - Are They Taxable?

Unfortunately, casino winnings in the US are fully taxable, so you’ll have to declare them as part of your tax returns each year. You’ll need to include it as part of your Form 1040 or Form 1040-SR, or if you win a certain amount of money (like a handpay in Vegas), the payer needs to provide you with a Form W-2G.

Unlike other types of income (like a salary), tax on gambling winnings is not progressive, so it’s a flat 24%, no matter how much you win.

You can deduct your losses from the taxable amount within your Schedule A (Form 1040), but remember that the losses you deduct can’t be higher than the winnings you report—so that’s not a loophole in the law.

It’s safe to say that tax avoidance is a very bad idea. But we understand that filing tax forms can feel really complicated, especially if you have gambling winnings to add into the mix.

If you’re still unsure of how to approach your online casino winnings from a tax perspective, it’s a good idea to consult some official resources. For example, the official IRS website has a whole lot of useful information, which you should always read before filing your taxes.

Or you might want to use a service like H&R Block, where you can choose to have a tax pro file for you, for absolute peace of mind.

Methodology

1. Metrics and Normalization

(a) Search Score

The raw "Search Score" values were normalized to a 0–100 scale using min-max scaling on the keywords "avoid tax", "tax evasion", "how to avoid taxes", "how to avoid capital gains tax", "don't pay tax" and "states low tax".
A higher normalized value indicates a greater likelihood of tax avoidance based on online interest.

(b) Domestic Migration Rank

Ranks (1–50) were reversed and normalized, as a higher rank (closer to 50) suggests a stronger likelihood of tax avoidance.
States with higher ranks contribute more to the overall score.

(c) Tax Band

Each state was categorized into one of three tax structures:
- No Income Tax: Assigned a score of 0 (least likely to avoid taxes).
- Flat Income Tax: Assigned a score of 50 (moderately likely to avoid taxes).
- Graduated-Rate Tax: Assigned a score of 100 (most likely to avoid taxes).

(d) Male-to-Female Ratio

The male-to-female ratio values were normalized to a 0–100 scale using min-max scaling.
Data shows that 70% of tax crime is committed by males.
A higher normalized value indicates a higher likelihood of tax avoidance.

2. Weights for Metrics

The normalized metrics were weighted based on their relative importance to the "Tax Avoidance Index":

Metric	Weight
Search Score Normalized	40%
Migration Rank Normalized	25%
Tax Band Score	20%
Male Ratio Normalized	15%

3. Final Index Calculation

The Tax Avoidance Index for each state was calculated as:

Tax Avoidance Index=(0.4×Search Score Normalized)+(0.25×Migration Rank Normalized)+(0.2×Tax Band Score)+(0.15×Male Ratio Normalized)

This composite score ranges from 0–100, with higher values indicating a greater likelihood of tax avoidance.

Disclaimer

The data in this article is intended for entertainment purposes only. Casinos.com does not claim any one state to be “more likely to evade taxes” than another. Please don’t use the information presented in this article as gambling or betting advice, and as always, please bet responsibly.