State Tax Rates 2020

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)
  • 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
  • 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:

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:

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%.

Below is a table with each state’s lowest and highest state income tax bracket.

State Tax Rates 2020

State Income Tax Lowest Bracket Income Tax Highest Bracket 2020 Pop.
Alabama2.00%5.00%4,908,621
Arizona2.59%4.54%7,378,494
Arkansas0.90%6.90%3,038,999
California1.00%13.30%39,937,489
Connecticut3.00%6.99%3,563,077
Delaware2.20%6.60%982,895
District of Columbia4.00%8.95%720,687
Georgia1.00%6.00%10,736,059
Hawaii1.40%8.25%1,412,687
Idaho1.60%7.40%1,826,156
Iowa0.36%8.98%3,179,849
Kansas2.90%5.20%2,910,357
Kentucky2.00%6.00%4,499,692
Louisiana2.00%6.00%4,645,184
Maine5.80%7.15%1,345,790
Maryland2.00%5.75%6,083,116
Minnesota5.35%9.85%5,700,671
Mississippi3.00%5.00%2,989,260
Missouri1.50%6.00%6,169,270
Montana1.00%6.90%1,086,759
Nebraska2.46%6.84%1,952,570
New Jersey1.40%8.97%8,936,574
New Mexico1.70%4.90%2,096,640
New York4.00%8.82%19,440,469
North Dakota1.10%2.90%761,723
Ohio0.50%5.00%11,747,694
Oklahoma0.50%5.00%3,954,821
Oregon5.00%9.90%4,301,089
Rhode Island3.75%5.99%1,056,161
South Carolina0.00%7.00%5,210,095
Vermont3.55%8.95%628,061
Virginia2.00%5.75%8,626,207
West Virginia3.00%6.50%1,778,070
Wisconsin4.00%7.65%5,851,754