State Individual Income Tax Rates for 2006

January 25, 2007

We recently posted the 2006 individual income tax rates for each state. Those are the rates that every state taxpayer will be paying when they file their 2006 state tax returns sometime between now and April 15, 2007. This is the single most up-to-date and accurate source for all the states’ rates, brackets, standard deductions and personal exemptions.

Surprisingly, no states increased individual income taxes this year, although this was made easier by strong economic growth and low unemployment. The trend across states continues to be to lower rates and broaden brackets.

New York actually allowed two temporary income tax rates of 7.375% over $100,000 and 7.7% over $500,000 to expire. Since so many “temporary” taxes become permanent, it is a testament to New York (and some would say a minor miracle) that those 3-year temporary rates were permitted to expire on schedule. New York also abolished its marriage penalty, which will further improve its score in the State Business Tax Climate Index.

Other highlights are as follows:

  • Arizona cut its rates across the board-lowering its top rate from 5.04% to 4.79%.
  • Nebraska increased the size of its top two brackets.
  • New Mexico continued to lower its top rate dropping it from 5.7% to 5.3%.
  • Ohio continued the phase down of its rates and its top rate now rests at 6.87%, down from 7.185% for tax year 2005.
  • Oklahoma and Utah widened their brackets.
  • Lastly, Washington, DC lowered its rates and widened its top bracket.

These states and the states currently discussing broadening their tax bases and lowering their rates are taking the right steps to improve their tax climate.

Here is to 2007 continuing the trend of sound tax policy across the states!

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