How the 50 States Rank By State and Local Tax Rates in 2025

Other states with high top rates include Hawaii (11.0 percent), New York (10.9 percent), New Jersey (10.75 percent), Oregon (9.9 percent), Minnesota (9.85 percent), Massachusetts (9 percent with an additional 0.63 percent payroll tax), and Vermont (8.75 percent). The corporate income tax is designed to tax only the profits of a corporation. However, a yearly profit snapshot may not fully capture a corporation’s true profitability.

Considering Potential International Corporate Tax Reforms in the US

To see whether your state’s individual income tax structure has moved up or down in the ranks in recent years, check out the table below. Being in a state with low or no income tax can be a major financial advantage, but it’s important to look at the full picture when deciding where you might save the most money. Remember to examine all tax implications, including sales, property, and other state-specific taxes and fees. The Michigan House on Tuesday voted to lower the state’s income tax rate from 4.25% to 4.05%, with several Democratic lawmakers joining Republicans in support of the measure. New York ranked second with a total effective tax rate of 14.74% and the average household spending approximately $13,774 in state and local taxes annually. The revenue and economic effects of limiting C-SALT deductions are just one aspect of the story.

Income Tax by State: Which Has the Highest and Lowest Taxes?

Taxes, however, are an important part of the mix, and modernizing a state’s tax structure helps position it for growth. States that rank better on the Index have better-structured tax codes, and states with better-structured tax codes get Wins Above Replacement. Typically, state income tax returns are due at the same time as your federal tax return — April 15th. However, some states may have different deadlines, and it’s worth checking the specifics for where you live, especially in years where the date might be pushed due to holidays or weekends. Choose state income tax rates any state from the list above for detailed state income tax information including 2025 income tax tables, state tax deductions, and state-specific income tax calculators.

Testimony: Alternatives to Tariffs to Boost US Competitiveness

• Taxes, however, are an important part of the mix, and modernizing a state’s tax structure helps position it for growth.
• Gasoline and diesel excise taxes (levied per gallon) are usually justified as a form of user tax paid by those who benefit from road construction and maintenance.
• Rather, they are the result of stock appreciations due to corporate activity such as increasing retained earnings, increasing capital investments, or issuing dividends.
• For example, Delaware is known to have a significant advantage in sales tax competition, because its tax rate of zero attracts businesses and shoppers from all over the Mid-Atlantic region.
• Competition among jurisdictions results in a variety of communities, each with residents who all value public services similarly.

These rate reductions resulted in a seven-place improvement on the corporate component, from 27th to 20th, and an improvement of three places, from 29th to 26th, on the individual income tax component of the Index. Indiana’s individual income tax rate decreased from 3.15 percent in 2023 to 3.05 percent in 2024 due to H.B. Indiana also implemented a filing and withholdingWithholding is the income an employer takes out of an employee’s paycheck and remits to the federal, state, and/or local government. It is calculated based on the amount of income earned, the taxpayer’s filing status, the number of allowances claimed, and any additional amount of the employee requests. Threshold to protect nonresidents who spend up to 30 days in the state and removed the transactions threshold from its definition of economic nexus, providing additional protection for small remote retailers.

This category includes metrics such as flag design, symbolism, and history, and contains many groupings of flags based on their colors. The design and symbolism of flags can reflect a place’s history, culture, and values, and can also have a significant impact on national identity and international relations. Education is the process of acquiring knowledge, skills, values, and attitudes through formal or informal means. This category includes metrics such as literacy rates, enrollment rates, teacher-to-student ratio, and educational attainment. Other metrics like education spending, curriculum quality, and technological readiness are also included.

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• The five states without a state sales tax—Alaska,32 Delaware, Montana, New Hampshire, and Oregon—achieve the best sales tax component scores.
• A generous carryforward period (of 20 years or above) with no statutory dollar cap now allows a state to score highly on the base subindex, even if it doesn’t offer a carryback.
• At the low end are Alaska (1.82 percent), Hawaii (4.50 percent), Wyoming (5.44 percent), Maine (5.50 percent), and Wisconsin (5.70 percent).
• This same 20 percent also has the highest concentration of business owners of all income groups.26 Because of these concentrations, marriage penalties have the potential to affect a significant share of pass-through businesses.

Articles that fit into period three begin to surface as early as 1985, as Helms (1985) and Bartik (1985) put forth forceful arguments based on empirical research that taxes guide business decisions. Helms concluded that a state’s ability to attract, retain, and encourage business activity is significantly affected by its pattern of taxation. Furthermore, tax increases significantly retard economic growth when the revenue is used to fund transfer payments. Bartik concluded that the conventional view that state and local taxes have little effect on business is false. The modern market is characterized by mobile capital and labor, with all types of businesses, small and large, tending to locate where they have the greatest competitive advantage. The evidence shows that states with the best tax systems will be the most competitive at attracting new businesses and most effective at generating economic and employment growth.

Theoretically, a VAT can avoid the economically damaging tax pyramiding effect. The VAT has never gained wide acceptance in the US, and only two states (Michigan and New Hampshire) have even attempted a VAT-like tax. Overall, the states with the best score on this rate subindex are Nebraska, Maine, Mississippi, Alabama, Florida, and Virginia. Generally, these states have low minimum and maximum tax rates on each schedule and a wage base at or near the federal level. The states with the worst scores are Hawaii, New Jersey, Rhode Island, Massachusetts, Washington, and Minnesota.