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State Tax Rates 2022

A tax is a compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization. Taxes are used to fund a number of public expenditures, such as roads, public transportation, education, and others. When expenditures exceed tax revenue, the government goes into debt. Taxes have two effects: an income effect because they reduce purchasing power to taxpayers (income tax) and substitution effect when taxes cause a substitution between taxed goods and untaxed goods (sales tax).

Federal income tax is the tax levied by the United States Internal Revenue Service (IRS) on the earnings of individuals and legal entities. However, most states collect state income and sales taxes in addition to the federal income tax. State taxes are given little attention compared to federal income taxes. States take one of three approaches when it comes to state income taxes: the state does not collect income tax, the state imposes a flat tax, taxing all income (or only dividends and interest) at the same rate, or the state imposes a progressive tax which taxes higher income at higher rates.

First, there are seven states that do not collect a state income tax. While these states do not have an additional income tax, other taxes, such as property or sales taxes, could be higher in these states. The seven states are: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Second, there are eleven states with flat income tax rates. In New Hampshire and Tennessee, the tax rate applies to dividends and interest income and regular income is typically not subject to state tax. These states are: Colorado (4.63%), Illinois, Indiana, Kentucky, (5%), Massachusetts (5.05%), Michigan (4.25%), New Hampshire (5.05%), North Carolina (5.25%), Pennsylvania (3.07%), Tennessee (2%), and Utah (4.95%). The remaining states and the District of Columbia have state income tax brackets. The higher an individual’s income, the higher the tax bracket he/she will be placed into. California has the highest potential state income tax bracket of 13%.

Here are the 10 states with the highest income tax rates:

  1. California (13.30%)
  2. Iowa (8.98%)
  3. Vermont (8.95%)
  4. New York (8.82%)
  5. Hawaii (8.25%)
  6. Idaho (7.40%)
  7. Maine (7.15%)
  8. South Carolina (7.00%)
  9. Connecticut (6.99%)
  10. Nebraska (6.84%)

State Tax Rates 2022

State Income Tax Lowest Bracket Income Tax Highest Bracket 2022 Pop.
Alabama2.00%0.00%4,949,697
Alaska0.00%0.00%720,763
Arizona2.59%0.00%7,640,796
Arkansas0.90%0.00%3,042,017
California1.00%13.30%39,664,128
Colorado0.00%0.00%5,961,083
Connecticut3.00%6.99%3,546,588
Delaware2.20%6.60%998,619
Florida0.00%0.00%22,177,997
Georgia1.00%6.00%10,936,299
Hawaii1.40%8.25%1,401,709
Idaho1.60%7.40%1,896,652
Illinois4.95%4.95%12,518,071
Indiana3.23%3.23%6,842,385
Iowa0.36%8.98%3,174,426
Kansas2.90%5.20%2,919,179
Kentucky2.00%0.00%4,487,233
Louisiana2.00%6.00%4,616,106
Maine5.80%7.15%1,359,677
Maryland2.00%5.75%6,075,314
Massachusetts5.00%0.00%6,922,107
Michigan4.25%0.00%9,995,212
Minnesota5.35%0.00%5,739,781
Mississippi3.00%0.00%2,961,536
Missouri1.50%0.00%6,184,843
Montana1.00%0.00%1,093,117
Nebraska2.46%6.84%1,960,790
Nevada0.00%0.00%3,238,601
New Hampshire5.00%0.00%1,378,449
New Jersey1.40%0.00%8,870,685
New Mexico1.70%4.90%2,109,093
New York4.00%8.82%19,223,191
North Carolina5.25%0.00%10,807,491
North Dakota1.10%0.00%774,008
Ohio0.50%0.00%11,727,377
Oklahoma0.50%0.00%4,007,179
Oregon5.00%0.00%4,325,290
Pennsylvania3.07%0.00%12,805,190
Rhode Island3.75%0.00%1,062,583
South Carolina0.00%7.00%5,342,388
South Dakota0.00%0.00%902,542
Tennessee1.00%1.00%7,001,803
Texas0.00%0.00%30,097,526
Utah4.95%4.95%3,363,182
Vermont3.55%8.95%622,882
Virginia2.00%5.75%8,638,218
Washington4.00%0.00%7,887,965
West Virginia3.00%0.00%1,755,715
Wisconsin4.00%0.00%5,867,518
Wyoming0.00%0.00%582,233

State Tax Rates 2022

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