Secrets of State Income Taxes

If you live in
Massachusetts, you’re used to all of your friends in other parts of the country
making fun of your state’s reputation for high taxes. Deserved or not, for
years Massachusetts has been called “Taxachusetts.”

Meanwhile, your
friends up north in New Hampshire pay no state earned-income tax. None! How can
this be? How can two adjacent states have such different tax policies?

In fact, income tax
rates in the U.S. vary greatly. Here’s a simplified guide courtesy of the Federation
of Tax Administrators:

STATE INDIVIDUAL
RATES FOR 2008

Alabama 2.0
- 5.0%

Alaska None

Arizona 2.59
- 4.54%

Arkansas 1.0
- 7.0%

California 1.0
- 9.3%

Colorado 4.63%

Connecticut 3.0
- 5.0%

Delaware 2.2
- 5.95%

Florida None

Georgia 1.0
- 6.0%

Hawaii 1.4
- 8.25%

Idaho 1.6
- 7.8%

Illinois 3.0%

Indiana 3.4%

Iowa 0.36
-8.98%

Kansas 3.5
- 6.45%

Kentucky 2.0
- 6.0%

Louisiana 2.0
- 6.0%

Maine2.0
- 8.5%

Maryland 2.0
- 4.75%

Massachusetts5.3%

Michigan 3.9%

Minnesota 5.35
- 7.85%

Mississippi 3.0
- 5.0%

Missouri 1.5
- 6.0%

Montana 1.0
- 6.9%

Nebraska 2.56
- 6.84%

Nevada None

New Hampshire Dividend
and interest income only

New Jersey 1.4
- 8.97%

New Mexico 1.7
- 5.3%

New York 4.0
- 6.85%

North Carolina 6.0
- 8.0%

North Dakota 2.1
-5.54%

Ohio 0.649
- 6.555%

Oklahoma 0.5
- 5.65%

Oregon 5.0
- 9.0%

Pennsylvania 3.07%

Rhode Island 25%
of Federal Taxes

South Carolina 2.5
- 7.0%

South Dakota None

Tennessee Dividend
and interest income only

Texas None

Utah 2.3
- 6.98%

Vermont 3.6
- 9.5%

Virginia 2.0
- 5.75%

Washington None

West Virginia 3.0
- 6.5%

Wisconsin 4.6
- 6.75%

Wyoming None

Alaska, Florida,
Nevada, South Dakota, Texas, Washington, and Wyoming have no state income tax.
New Hampshire and Tennessee have none except a tax on dividend and interest
income.

Should you move to
one of these nine income-tax-free states? That’s up to you, but the real tax
story is more than just income taxes.

The other significant
sources of state and local revenues are property taxes, sales taxes, fuel
taxes, cigarette taxes, estate taxes, and various fees. If you factor in all of
the taxes paid by residents of individual states, here’s whet you get (again,
courtesy the Federation of Tax Administrators):

RANKSTATE TOTAL
BURDEN

1. New
Jersey11.8%

2. New
York 11.7%

3.Connecticut
11.1%

4.Maryland
10.8%

5.Hawaii
10.6%

6.California
10.5%

7.Ohio
10.4%

8.Vermont
10.3%

9.Wisconsin
10.2%

10.Rhode
Island 10.2%

11.Pennsylvania
10.2%

12.Minnesota
10.2%

13.Idaho
10.1%

14.Arkansas
10.0%

15.Maine
10.0%

16.Georgia
9.9%

17.Nebraska
9.8%

18.Virginia
9.8%

19.Oklahoma
9.8%

20.North
Carolina 9.8%

21.Kansas
9.6%

22.Utah
9.6%

23.Massachusetts
9.5%

24.Delaware
9.5%

25.Kentucky
9.4%

26.Oregon
9.4%

27.Michigan
9.4%

28.Indiana
9.4%

29.West
Virginia 9.3%

30.Illinois
9.3%

31.Iowa
9.3%

32.Missouri
9.2%

33.North
Dakota 9.2%

34.Colorado
9.0%

35.Washington
8.9%

36.Mississippi
8.9%

37.South
Carolina 8.8%

38.Alabama
8.6%

39.New
Mexico8.6%

40.Montana
8.6%

41.Arizona
8.5%

42.Louisiana
8.4%

43.Texas
8.4%

44.Tennessee
8.3%

45.South
Dakota7.9%

46.New
Hampshire7.6%

47.Florida
7.4%

48.Wyoming
7.0%

49.Nevada
6.6%

50.Alaska
6.4%

When the total burden of
taxes and fees is added up, ?