Top State Income Tax Rates

July 2, 2009

Joseph Bishop-Henchman

Joseph Bishop-Henchman

The Los Angeles Times blog, referencing our list yesterday of last minute state budgets, states a new fact:

California has lost the distinction of having the highest personal income tax rate among the 50 states.

True! Following a flurry of legislative activity in recent weeks, California no longer has the highest individual income tax top rate in the United States. Here are state income tax rates over 8% now:

State

Individual Income Tax Rates

Hawaii

11% (on income over $200,000)

Oregon

11% (on income over $250,000)

New Jersey

10.75% (on income over $1 million)

California

10.55% (on income over $1 million)

New Jersey (2nd bracket)

10.25% (on income over $500,000)

Hawaii (2nd bracket)

10% (on income over $175,000)

Oregon (2nd bracket)

9.9% (on income over $125,000)

Rhode Island

9.9% (on income at the federal top rate)
California (2nd bracket)

9.55% (on income over $47,055)

Vermont

9.4% (on income at the federal top rate)
Oregon (3rd bracket)

9% (on income over $7,600)
Hawaii (3rd bracket)

9% (on income over $150,000)
Rhode Island (2nd bracket)

9% (on income at the second highest federal rate)

Iowa

8.98% (on income over $63,315)

New York

8.97% (on income over $500,000)
Vermont (2nd bracket)

8.9% (on income at the second highest federal rate)

Maine

8.5% (on income over $19,450)
California (3rd bracket)

8.25% (on income over $37,233)
Hawaii (4th bracket)

8.25% (on income over $48,000)
Vermont (3rd bracket)

8.25% (on income at the third highest federal rate)
New Jersey (3rd bracket)

8% (on income over $400,000)

Notes: Rhode Island offers an optional flat tax with fewer deductions, not shown here. Iowa allows deduction of federal income tax, reducing their effective tax rate. Maryland is not included, although substantial county income taxes produce a top rate of over 9%. Maine has passed a bill to reduce their income tax top rate to 6.85%, effective January 1, 2010. Local income taxes not included.

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A 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.

An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S.