Such income includes wages for services within the state as well as income from a business with operations in the state. Where income is from multiple sources, formulary apportionment may be required for nonresidents. Generally, wages are apportioned based on the ratio days worked in the state to total days worked. For example, Alabama allows a deduction for federal income taxes. Although Alabama’s income tax is essentially flat, the federal income tax is still progressive. So Alabama’s deduction for federal income taxes disproportionately benefits the state’s wealthiest taxpayers.

Most states allow taxpayers to calculate their EITC as a percentage of the federal credit. Doing so makes the credit easy for state taxpayers to claim and straightforward for state tax administrators. Property taxes, including both taxes on individuals and business taxes, are usually somewhat regressive. In the 10 states with the most regressive tax structures , the lowest-income 20 percent pay up to six times as much of their income in taxes as their wealthy counterparts. The lower one’s income, the higher one’s overall effective state and local tax rate.

Existing Business Resources

In this respect, individuals and corporations not resident in the state generally are not required to pay any income tax to that state with respect to such income. Gross income generally includes all income earned or received from whatever source with some exceptions. Most states also exempt income from bonds issued by that state or localities within the state as well as some portion or all of Social Security benefits. Many states provide tax exemption for certain other types of income, which varies widely by state.

Local Income Tax Distribution Archive – County by county and city by town distributions of local income tax. Also included in the distribution of local income tax revenue are comparisons of delinquent distributions and fiduciary distributions by county, and by municipality. Your local income tax is based on where you live – not where you work, or where your tax preparer is located. Be sure to use the correct rate for the local jurisdiction in which you live. Moreover, many states have rules in place that provide special tax breaks for capital gains and other income sources that are highly concentrated in the hands of the best-off 1 percent. The Institute on Taxation & Economic Policy has engaged in research on tax issues since 1980, with a focus on the distributional consequences of both current law and proposed changes.

Rates by jurisdiction

Research shows that when income growth concentrates among the wealthy, state revenues grow more slowly, especially in states that rely more heavily on taxes that disproportionately fall on low- and middle-income households. The Pennsylvania personal income tax does not provide for a standard deduction or personal exemption. However, individuals may reduce tax liabilities through certain deductions, credits and exclusions. Importantly, when it comes to sales taxes, you shouldn’t just focus on the rate but also the tax base, meaning what, exactly, is being taxed? If you want to compare all of the state tax rates on one page, visit the list of state income taxes. For info on 2011 federal income tax and federal tax refunds, visit the federal income tax and federal tax refund pages.

The ITEP model, however, adds state-by-state estimating capabilities not found in those government models. The methodology used in this study is broadly similar to the approach used in previous editions of the states by income tax rate. However, we have recently made several methodological improvements impacting both income estimation and tax modeling. For this reason, we discourage direct comparison of the report’s results with prior editions.

Read, Watch, Listen

Business taxable income in most states is defined, at least in part, by reference to federal taxable income. Iowa enacted comprehensive tax reforms in 2018, 2021, and2022, and many of these reforms will continue phasing in over the coming years. Effective January 1, Iowa’s nine individual income tax rates were consolidated into four, and the top rate was decreased from 8.53 to 6 percent.

California tops the list with the highest income tax rates in the country; its highest tax rate is 12.3%, but it also implements an additional tax on those with income of $1 million or more, which makes its highest actual tax rate 13.3%. But most income tax states go far beyond these tax preferences inherited from federal income tax rules to allow special elderly-only tax breaks of their own. Thirty-six states allow an income tax exemption for private or public pension benefits. These range from fully exempting all pension benefits for adults above a certain age (three states — Illinois, Mississippi, and Pennsylvania) to only exempting very specific benefits such as those for military veterans. More than a dozen states allow senior citizens an extra personal exemption or exemption credit, allowing these taxpayers to shelter twice as much of their income from tax as similar non-elderly taxpayers can claim.