Most state governments in the US collect an income tax for all income earned within the state. This is collected and filed separately and independently from the federal income tax. Each state has a unique tax system and thus tax policies vary from one state to the other. Some states have very high income tax rates while others, specifically seven, have no income tax at all. According to the law, tax rates need an annual adjustment due to the inflation factor.
States with the Highest Income Tax
The following are some of the states with the highest income tax rates:
The state of California is not tax friendly at all, particularly to individuals with high earnings. A report by the Federation of Tax Administrators ranks California as the state with the highest income tax rates in the US. The state uses a progressive tax system whereby, the tax rate increases as income increases. The state has the most tax brackets, ten in total, ranging from 1% to 13.3% for different income levels. Individuals earning more than $1,000,000 USD part with 13.3% of their earnings. Married couples filing returns jointly have wider tax brackets. The state levies 13.3% tax for annual earnings of over $1,052,886 USD.
Statistics indicate that Hawaii generates 40% of its total revenue from tax collections. A large proportion of the tax revenue comes from income tax. The state has nine tax brackets ranging from 1.4% to 8.25% for earnings above $48,000 USD as of 2017. The state government allows couples filing jointly to pay a lower overall rate, 8.25% is levied on annual income exceeding $6,427.20 USD.
The state of Oregon has one of the highest income tax rates in the US. The top rate is at 9.9% for the income brackets of more than $125,000 USD and $250,000 USD for single and joint filers respectively. The lowest tax rate is at 5%, which is higher than the top rates in several other states. Oregon has no sales tax and property tax rates are quite low. Therefore, Oregon charges high income tax to generate the much needed government revenue.
High-income earners in Minnesota are the hardest hit by the high income tax rates. At a high of 9.85% and a low of 5.35%, this state is quite tax unfriendly even to the low-income earners. In December 2016, the Minnesota Department of Revenue released the tax brackets for the tax year 2017. A tax rate of 9.85% applies to individuals earning more than $130,760 USD for single filers and $261,511 USD for married couples filing jointly.
Iowa income tax rates ranges from 0.36% to 8.98% divided into nine tax brackets. The top rate is applies to individuals pocketing an annual income of $69,256 USD and above. Filing returns is usually due on April 30 of each year. The state exempts income tax for low-income earners making a meager $9,000 USD or less annually. Citizens older than 65 years with an annual net income of $24,000 USD or less do not pay income tax.
Other States with High Income Tax Rates
Other states with high income tax include New Jersey at 8.97%, Washington, D.C. at 8.95%, Vermont at 8.98%, New York at 8.82%, and Maine at 7.95%. Certain states have similar income tax rates. For instance, Arkansas, Illinois, and South Carolina have an income tax rate of 7%. The states of Missouri, Louisiana, Tennessee, Kentucky, and Georgia share an income tax rate of 6%. Some state such as Florida, Alaska, and Texas among others do not charge income tax at all.
States With the Highest Income Tax
|Rank||State||Maximum Income Tax Rate (Percentage)|
|44||Washington||No Income Tax|
|45||Nevada||No Income Tax|
|46||Wyoming||No Income Tax|
|47||Texas||No Income Tax|
|48||South Dakota||No Income Tax|
|49||Florida||No Income Tax|
|50||Alaska||No Income Tax|