In some states, a large number of brackets are clustered within a narrow income band Georgia’s taxpayers reach the state’s sixth and highest bracket at $7,000 in annual income. Subscribe to get insights from our trusted experts delivered straight to your inbox. Stay informed on the tax policies impacting you. Top marginal rates range from North Dakota’s 2.9 percent to California’s 13.3 percent. At the other end of the spectrum, Hawaii has 12 brackets, and California has 10. Kansas, for example, imposes a three-bracket income tax system. Conversely, 32 states levy graduated-rate income taxes, with the number of brackets varying widely by state. Of those states taxing wages, nine have single-rate tax structures, with one rate applying to all taxable income. Tennessee is currently phasing out its Hall Tax (income tax applied only to dividends and interest income) and is scheduled to repeal its income tax entirely for tax years beginning January 1, 2021. Forty-one tax wage and salary income, while two states–New Hampshire and Tennessee–exclusively tax dividend and interest income. Their prominence in public policy considerations is further enhanced by the fact that individuals are actively responsible for filing their income taxes, in contrast to the indirect payment of sales and excise taxes.įorty-three states levy individual income taxes. Individual income taxes are a major source of state government revenue, accounting for 37 percent of state tax collections. Some states tie their standard deductions and personal exemptions to the federal tax code, while others set their own or offer none at all. Some states double their single-bracket widths for married filers to avoid the “ marriage penalty.” Some states index tax brackets, exemptions, and deductions for inflation many others do not. States’ approaches to income taxes vary in other details as well. Hawaii has 12 brackets, the most in the country. Of those states taxing wages, nine have single-rate tax structures, with one rate applying to all taxable income.Forty-three states levy individual income taxes.Individual income taxes are a major source of state government revenue, accounting for 37 percent of state tax collections.
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