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Monday Map: Top State Income Tax Rates

2 min readBy: Joseph Bishop-Henchman

So far this month, 23,000 visitors have checked out our page listing income tax rates by state. Now it’s impossible to get every tax bracketA tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat. from every state into one printable map (Hawaii has 12 brackets, for instance), so this week we’re presenting just the top rates. Maps in future weeks will have effective state income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. rates overall and effective income taxes paid by the median income earner.

One interesting criticism we got about a dozen times from our sales tax map was that it didn’t include income taxes. This was especially strong from states like Washington, Nevada, Texas, Tennessee, New Hampshire, and Florida, which look very bad on the sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. map but pretty good on this map. Our website has all this information, but for a holistic look wait for our State-Local Tax Burdens report that will look at all state-local taxes.

One trend we’ve followed this year is the rise of special income taxes on high-income earners, dubbed “millionaires taxes” because the New York and New Jersey ones originally kicked in at income over $1,000,000. That threshold as fallen as state officials reach for more revenue, so what we really have now are “half” millionaires taxes, “quarter” millionaires taxes, and in Hawaii, a “one-fifth” millionaires tax (the 11% rate kicks in at $200,000).

People at that income level are being hit up to pay for everything from state services to health care reform to the war in Afghanistan, which is problematic.

  • First, particularly for those on the left, it’s problematic because people aren’t genuinely supporting expanded public services if they’re getting someone else to pay for them. When the money runs short, and it will since there are only so many millionaires, the stomach won’t be there to save the new spending.
  • Second, a state budget that relies disproportionately on high income earners is a volatile one, since such earners’ incomes are exaggeratedly good in good times and exaggeratedly bad in bad times.
  • Third, enacting such taxes sends the signal that you’d rather penalize the entrepreneurs and job creators rather than force everyone to pay for the services they demand or cut them back.

We also highlight those states with flat income taxes. It may not be the states you think!

Maine is already poised to look better on this map in 2010, thanks to a reform that will lower its income tax top rate in 2010 to 6.85%. However, an effort to repeal that reform will be on the June ballot, so stay tuned. Rhode Island’s dual numbers reflect their alternative flat taxAn income tax is referred to as a “flat tax” when all taxable income is subject to the same tax rate, regardless of income level or assets. . Local income taxes in 14 states are not included.

Click on the image for larger size version of “Top State Income Tax Rates.” Click here for the map in printer-friendly or alternative formats (PDF, TIFF).

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