I’ve talked a lot in the past about federal income tax rates, but I haven’t talked much about state income tax rates. The main reason for this is that state income tax brackets are all over the board. That being said, I thought it might be interesting to take a look at the states at the very bottom (or top, depending on how you look at it) of the heap.
States with no income tax
- New Hampshire
- South Dakota
*Note: New Hampshire and Tennessee don’t tax wage income, but they do interest and dividends. The applicable rates are 5% and 6%, respectively.
What about other taxes?
Of course, income tax isn’t the only thing to consider when figuring a state’s tax burden. You also have to factor in things like property taxes, sales taxes (both state and local), special assessments, and so on. For example, while Alaska and New Hampshire have no state sales tax, Tennessee has a 7% state sales tax on all purchases (including food, clothing, and medicine).
On the other end of the spectrum are states like Hawaii and Oregon, whose state income tax rates top out at 11% (albeit for only the highest income earners). For their part, Hawaii throws an another 4% state sales tax on top of their income tax, whereas Oregon has no state sales tax.
And just look at those poor Californians… Their top state income tax bracket it 10.3% and they get to pay an additional 8.25% in state sales tax. Yikes. I sure am glad that I don’t live in California!
What about you? What’s the tax situation in your state? If you live in a state without income taxes, what do you think? Are they making up for it with other forms of taxation? Or are you seeing less in the way of government provided services?