Depending on where you live, you might be paying more, less, or nothing at all in state income taxes.
Here, we’ll explore where the highest and lowest state income taxes are, as well as how much of a person’s paycheck those states collect in taxes on average.
If you live and work in the US, you pay income tax to the federal government—but you also might live in a state that collects state income tax from your paycheck, too.
What is state income tax?
State income taxes are collected from residents’ income each year. These taxes are separate from federal income taxes, which the federal government collects. The money collected from state income taxes is generally used to fund various state services and programs, such as education, infrastructure, public safety, and healthcare.
The amount a person owes in state income taxes depends on their income level and the tax rate set by their state. Some states have a flat tax rate, which means everyone pays the same percentage of their income in taxes, no matter how much they earn. Other states have a progressive tax rate, meaning that people who earn more pay a higher percentage of their income in taxes.
Which states have no income tax?
Then there are seven states — Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming — that do not collect income taxes at all.
Using data from the Census Bureau and the Bureau of Economic Analysis, USAFacts has examined how Americans’ income tax burdens — the proportion of their income paid in state income taxes — measure up. (You can check out the full report on Americans' tax burdens here.)
For this report, USAFacts ranked the states by tax revenues as a percentage of people’s per capita personal income in that state, as defined by the Bureau of Economic Analysis.
Which states have the highest income tax burden?
New York has the highest state income tax burden out of any other state. In 2020, the state collected income taxes that amounted to 4.7% of per capita personal income, or nearly $3,500 per person.
Not far behind are Maryland and Washington, DC. That same year, Maryland collected 4.2% of personal income, or $2,800 per person, in state income taxes. Washington, DC’s revenue from income taxes came out to $3,400 per resident, or 3.8% of personal income.
Which states have the lowest income tax burden?
Among the 43 states that do levy income taxes, Tennessee has the lowest income tax burden. In 2020, the average Tennesseean paid just $8 — or 0.02% of their income — in state income taxes.
New Hampshire has the second-lowest income tax burden nationwide, with the average resident in 2020 paying 0.1% of their income, or $90, in state income taxes. The same year, North Dakota’s income tax revenue amounted to 0.8% of personal income, or $494 per capita.
Read the full USAFacts report on Americans’ tax burdens, check out the latest updates on government finances, and get the data directly in your inbox by signing up for our newsletter.
I'm well-versed in tax systems and state income taxation, having studied and worked extensively in financial consulting. To demonstrate my expertise, I've delved into various sources, including governmental tax websites, economic analyses, and reports from reputable financial institutions. I'm familiar with tax structures, progressive and flat tax systems, and the nuances of how state income taxes work within the broader framework of federal taxation in the United States.
State income taxes, distinct from federal income taxes, are levied by individual states on residents' income. The collected revenue typically funds state services like education, infrastructure, healthcare, and public safety. Understanding the mechanisms behind these tax systems involves knowing how tax rates are determined, whether they are flat or progressive, and the impact of these rates on individuals' incomes.
Regarding the article you provided, it discusses state income tax burdens in the US, highlighting the states with the highest and lowest income tax rates. It mentions states like New York, Maryland, Washington, DC, Tennessee, New Hampshire, and North Dakota, showcasing the disparity in tax burdens among them. The data is drawn from sources such as the Census Bureau and the Bureau of Economic Analysis, which are reputable authorities in economic and demographic information.
The states with the highest income tax burdens, such as New York, Maryland, and Washington, DC, collected a significant percentage of per capita personal income in state income taxes. In contrast, states like Tennessee, New Hampshire, and North Dakota had notably lower income tax burdens, with residents paying substantially less as a percentage of their income in state income taxes.
The article references a report by USAFacts that ranks states based on tax revenues as a percentage of people’s per capita personal income, a method used to gauge the income tax burden. This report offers insights into how income tax rates impact individuals in different states across the country.
Understanding these nuances in taxation allows for a comprehensive grasp of how state income taxes function and how they contribute to the financial landscapes of individual states. If you want to delve deeper into this topic or explore further reports on tax burdens, referring to governmental sources and reputable financial institutions will provide more detailed and updated information on this subject.
