Individual Tax Insights: Examining State Income Taxes From Roots to Revenue

The Tax Foundation recently released a map of state and local individual income tax collections across the United States, and it presents some interesting facts about individual income taxes.

Despite being the most populous state in the country, for example, California ranks #8 in individual income tax collections with $1,347 being collected per person.  New York is #1 with $2,289 being collected per person.

Nevertheless, California has the highest tax rate in the country – 13.3 percent on taxable income in excess of $1 million, whereas New York’s top income tax rate is 8.82 percent, according to Bloomberg’s Most & Least Taxing States of 2014

Interestingly, California was ranked as the 16th most miserable state in the country by Bloomberg.  New York, on the other hand, fared better by taking 28th place.  The “Most Miserable States” rankings are based on factors such as air pollution level and child poverty rates, but it would be interesting to see how these rankings would change if tax rates were added to the mix.

In addition to seeing how much each state brings into its coffers each year in terms of income tax collections, it’s also interesting to know how long these states have been imposing their income tax.  California, for example, adopted its income tax in 1935 whereas New York adopted its tax in 1919.  Hawaii adopted its state tax even earlier – in 1901.

However, the majority of states enacted an income tax in the 1930s when property tax collections were declining due to the Great Depression, notes the Tax Foundation.

Taxpayers living in states that currently impose an income tax are probably hoping their state goes the way of Alaska, which repealed its income tax in 1979.  However, as states struggle to fund certain education and health care programs, they will rely more and more on individual income tax collections to bring in revenue to fill their coffers.

For more information about individual income taxes, check out Bloomberg BNA’s Individual Income Tax Navigator by signing up for a free trial of the Bloomberg BNA Premier State Tax Library today.

In other developments . . .

Ohio recently enacted legislation that increases the state’s personal income tax exemptions, according to a Bloomberg BNA Weekly State Tax Reportarticle.

By: Kathleen Caggiano


Follow Kathleen on Twitter at:  @katcaggiano .

Follow BBNA on Twitter at: @BBNATax .