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Tax Rates by State 2023
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 a 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. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming are the seven states.
There are twelve states with flat income tax rates. In New Hampshire, the tax rate applies to dividends and interest income and regular income is typically not subject to state tax. Similarly, in Washington, only capital gains income is subject to the state’s income tax. Other states with a flat-rate income tax are Arizona (2.5%), Colorado (4.4%), Idaho (5.8%), Illinois (4.95%), Kentucky (4.5%), Michigan (4.25%), Mississippi (5%), North Carolina (4.75%), Pennsylvania (3.07%), and Utah (4.85%).
The remaining states and the District of Columbia have state income tax brackets. The higher an individual’s income, the higher the tax bracket they will be placed into. California has the highest potential state income tax bracket of 13.3%.
Here are the 10 states with the highest income tax rates:
- California: 13.3%
- Hawaii: 11%
- New York: 10.9%
- District of Columbia: 10.75%
- New Jersey: 10.75%
- Oregon: 9.9%
- Minnesota: 9.85%
- Massachusetts: 9%
- Vermont: 8.75%
- Wisconsin: 7.65%
- Most states tax any income higher than $0, so their Lowest Bracket value is actually the lowest income level at which an individual's tax rate first rises above the minimum rate.
- Delaware, Mississippi, Missouri, and Ohio do not tax income between $0 and the lowest bracket, so their Lowest Bracket value indicates the income level at which an individual must begin to pay income tax.
State | Min Rate | Max Rate | # Brackets | Lowest Bracket | Highest Bracket (Single) | Highest Bracket (Joint) | Notes |
|---|---|---|---|---|---|---|---|
| Arizona | 2.5% | 2.5% | 1 | Flat rate | |||
| North Dakota | 1.1% | 2.9% | 5 | 41,775 | 458,350 | 458,350 | |
| Pennsylvania | 3.07% | 3.07% | 1 | Flat rate | |||
| Indiana | 3.15% | 3.15% | 1 | Flat rate | |||
| Ohio | 2.76% | 3.99% | 5 | 26,050 | 115,300 | 115,300 | No tax on income lower than $26050 |
| Louisiana | 1.85% | 4.25% | 3 | 12,500 | 50,000 | 100,000 | |
| Michigan | 4.25% | 4.25% | 1 | Flat rate | |||
| Colorado | 4.4% | 4.4% | 1 | Flat rate | |||
| Kentucky | 4.5% | 4.5% | 1 | Flat rate | |||
| North Carolina | 4.75% | 4.75% | 1 | Flat rate | |||
| Oklahoma | 0.25% | 4.75% | 6 | 1,000 | 7,200 | 12,200 | |
| Utah | 4.85% | 4.85% | 1 | Flat rate | |||
| Arkansas | 2% | 4.9% | 3 | 4,300 | 8,500 | 8,500 | |
| Illinois | 4.95% | 4.95% | 1 | Flat rate | |||
| Missouri | 2% | 4.95% | 8 | 1,121 | 7,847 | 7,847 | No tax on income lower than $1121 |
| Alabama | 2% | 5% | 3 | 500 | 3,000 | 6,000 | |
| Kansas | 3.1% | 5.7% | 3 | 15,000 | 30,000 | 60,000 | |
| Georgia | 1% | 5.75% | 6 | 750 | 7,000 | 10,000 | |
| Maryland | 2% | 5.75% | 8 | 1,000 | 250,000 | 300,000 | |
| Virginia | 2% | 5.75% | 4 | 3,000 | 17,000 | 17,000 | |
| Idaho | 5.8% | 5.8% | 1 | Flat rate | |||
| New Mexico | 1.7% | 5.9% | 5 | 5,500 | 210,000 | 315,000 | |
| Rhode Island | 3.75% | 5.99% | 3 | 68,200 | 155,050 | 155,050 | |
| Iowa | 4.4% | 6% | 4 | 6,000 | 75,000 | 150,000 | |
| West Virginia | 3% | 6.5% | 5 | 10,000 | 60,000 | 60,000 | |
| Delaware | 2.2% | 6.6% | 7 | 2,000 | 60,000 | 60,000 | No tax on income lower than $2000 |
| Nebraska | 2.46% | 6.64% | 4 | 3,700 | 35,730 | 71,460 | |
| Montana | 1% | 6.75% | 7 | 3,600 | 21,600 | 21,600 | |
| Connecticut | 3% | 6.99% | 7 | 10,000 | 500,000 | 1,000,000 | |
| Maine | 5.8% | 7.15% | 3 | 24,500 | 58,050 | 116,100 | |
| Wisconsin | 3.54% | 7.65% | 4 | 13,810 | 304,170 | 405,550 | |
| Vermont | 3.35% | 8.75% | 4 | 42,150 | 213,150 | 259,500 | |
| Massachusetts | 5% | 9% | 2 | 1,000,000 | 1,000,000 | 1,000,000 | Starting with the 2023 tax year, income above $1 million will be taxed at 9% |
| Minnesota | 5.35% | 9.85% | 4 | 30,070 | 183,340 | 304,970 | |
| Oregon | 4.75% | 9.9% | 4 | 4,050 | 125,000 | 250,000 | |
| District of Columbia | 4% | 10.75% | 7 | 10,000 | 1,000,000 | 1,000,000 | |
| New Jersey | 1.4% | 10.75% | 7 | 20,000 | 1,000,000 | 1,000,000 | |
| New York | 4% | 10.9% | 9 | 8,500 | 25,000,000 | 25,000,000 | |
| Hawaii | 1.4% | 11% | 12 | 2,400 | 200,000 | 400,000 | |
| California | 1% | 13.3% | 9 | 10,099 | 1,000,000 | 1,354,550 |