Another U.S. tax deadline has passed, and you may be wondering how green the grass is on the other side of the state border. Today’s maps and charts, from cost information website HowMuch.net, show the difference in tax rates between states to help you discover which states pay the lowest income taxes.
Before we dive in to the data, it is worth noting that there are seven states that currently have zero interest tax, including Florida, Nevada, Texas, Alaska, South Dakota, Washington State and Wyoming. New Hampshire and Tennessee also have no income tax, but they do tax interest and dividends.
The other 41 states (and one district) all levy an income tax. Here’s the average amount paid in each state:
Average Income Tax
California has the highest average tax of any state at 10.4%. Oregon, Minnesota, Hawaii, DC, New York, Vermont, and Maine also have average state income taxes that are higher than 7.5%.
Aside from the states with zero income tax, there are also 14 that have average tax rates below 5%.
However, as HowMuch.net notes, the average isn’t necessarily the best indicator when it comes to this data. Since most tax schemes are progressive, the tax rates of most states vary heavily depending on the level of personal income each year.
Here’s the difference between what the highest income group (top 0.1%) and the median income group (top 50%) are paying:
Income Tax Gap: Rate for Top 0.1% vs. Top 50%
Illustrated a different way, see how this changes based on moving up the tax bracket from the top 25% to the top 0.1%:
Income Tax Rate: Top 25%
The top 25% of earners ($74,955 per year and up) pay the most in Oregon, which has a tax rate of 7.4%. Three other states charge 6% or more: Hawaii (6.89%), Idaho (6.05%) and Maine (6.00%).
Compare this to the top 0.1% bracket of earners ($1,860,848 per year and up):
Income Tax Rate: Top 0.1%
California now charges the most at 11.54%, while Oregon, Minnesota, and Hawaii all have rates hovering around 10%.
I live in Minnesota – Land of 10,000 taxes.
These bastards even tax your social security – just so they can give it to Somali’s and Light Rail to nowhere.
I lived in MN for a couple years. Moved away a couple years ago, but still go there for work. The taxes are plentiful, but it was the winters that drove me away. NC is not great on taxes, but cheaper than MN and has much nicer winters.
I read somewhere the other day that the top 1% in California pay 45% of the State taxes.
Makes me wonder why they stay there, there must be some reward for it or they wouldn’t. People with that much wealth can easily move wherever they want and take it with them, unlike someone stuck in the average working class job that depends on their being where they are.
I’m in California and since most of my income comes from rental property located in California moving would do no good because they would still tax my California income no matter where I live.
I also collect SS but it takes all of it to pay the income tax to the IRS and the state.
People are willing to stay in California because of the weather.
Most interesting was the relatively low taxes in Illinois. It is going to be annoying when the Feds bail them out with my money when I am paying twice that rate or more to keep NY somewhat more solvent.
Income taxes are only part of the equation. You have to look at the overall tax burden of income, sales and property taxes. I can guarantee you if there are low income or sales taxes, the property taxes will crush you – at least in a large urban area where all the jobs are located.
A good friend of mine lives in Illinois, collar county just outside Chicago. Looks lovely with the low income tax, but he’s paying $13,000 year prop taxes on a home worth $350,000. Friggin nuts.