2022 State Earnings Tax Rankings


This week’s map examines states’ rankings on the person earnings tax element of our 2022 State Enterprise Tax Local weather Index. The person earnings tax is vital to companies as a result of states tax sole proprietorships, partnerships, and normally restricted legal responsibility firms (LLCs) and S firms underneath the person earnings tax code. Nevertheless, even conventional C firms are not directly impacted by the person earnings tax, as this tax influences the situation choices of people, probably impacting the state’s labor provide, and better particular person earnings taxes improve the worth of labor. States with gross receipts taxes additionally prolong these to pass-through companies along with C firms, and that is additionally accounted for on this element of the Index.

States that rating nicely on the Index’s particular person earnings tax element normally have a flat, low-rate earnings tax with few deductions and exemptions. In addition they have a tendency to guard married taxpayers from being taxed extra closely when submitting collectively than they might be when submitting as two single people. As well as, states carry out higher on the Index’s particular person earnings tax element in the event that they index their brackets, deductions, and exemptions for inflation, which avoids unlegislated tax will increase. 

States with an ideal rating on the person earnings tax element (Alaska, Florida, South Dakota, and Wyoming) haven’t any particular person earnings tax and no payroll taxes in addition to the unemployment insurance coverage tax. The subsequent highest-scoring states are Nevada, Texas, Washington, Tennessee, and New Hampshire. Nevada taxes wage earnings at a low charge underneath the state’s Modified Enterprise Tax however doesn’t tax funding earnings. New Hampshire taxes curiosity and dividend earnings however not wage earnings. Tennessee, Texas, and Washington don’t tax wage earnings however don’t obtain an ideal rating on this element as a result of they apply their gross receipts taxes to S firms, which, in most states, could be taxed underneath particular person earnings tax codes. (Washington and Texas additionally apply these to restricted legal responsibility firms.) Different states that rating nicely on the person earnings tax element are Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, North Carolina, and Utah, as a result of all of them have a single low tax charge.

States that rating poorly on this element are inclined to have excessive tax charges and really progressive bracket constructions. They often fail to index their brackets, exemptions, and deductions for inflation, don’t enable the deduction of international or different state taxes, penalize married {couples} submitting collectively, don’t embrace LLCs and S firms underneath the person earnings tax code (as a substitute taxing them as C firms), and should impose an various minimal tax (AMT). The poorest-performing states on this 12 months’s particular person earnings tax element are New York, California, New Jersey, Connecticut, and Hawaii.

Excessive marginal charges adversely have an effect on labor output and funding, and may affect location decision-making, particularly in an period of enhanced mobility, the place it’s simpler for people to maneuver with out jeopardizing their present job, or with out limiting the scope of their seek for a brand new one.

Click on right here to see an interactive model of states’ particular person earnings tax rankings, after which click on in your state for extra details about how its tax system compares regionally and nationally.

To see whether or not your state’s particular person earnings tax construction has moved up or down within the ranks lately, take a look at the desk under.

Particular person Earnings Tax Part of the State Enterprise Tax Local weather Index (2019–2022)
State 2019 Rank 2020 Rank 2021 Rank 2022 Rank Change from 2021 to 2022
Alabama 31 31 29 27 2
Alaska 1 1 1 1 0
Arizona 19 17 18 18 0
Arkansas 40 40 42 39 3
California 49 49 50 49 1
Colorado 13 13 13 14 -1
Connecticut 43 45 47 47 0
Delaware 44 44 44 44 0
Florida 1 1 1 1 0
Georgia 37 36 36 35 1
Hawaii 47 47 46 46 0
Idaho 23 25 24 20 4
Illinois 14 14 12 13 -1
Indiana 15 15 14 15 -1
Iowa 42 41 40 38 2
Kansas 21 22 21 22 -1
Kentucky 17 18 17 17 0
Louisiana 35 35 35 34 1
Maine 25 20 22 23 -1
Maryland 45 43 45 45 0
Massachusetts 11 11 16 11 5
Michigan 12 12 11 12 -1
Minnesota 46 46 43 43 0
Mississippi 28 28 27 25 2
Missouri 27 23 20 21 -1
Montana 22 24 23 24 -1
Nebraska 30 30 30 29 1
Nevada 5 5 5 5 0
New Hampshire 9 9 9 9 0
New Jersey 50 50 49 48 1
New Mexico 26 27 26 36 -10
New York 48 48 48 50 -2
North Carolina 16 16 15 16 -1
North Dakota 18 19 25 26 -1
Ohio 41 42 41 41 0
Oklahoma 32 32 31 30 1
Oregon 38 39 38 42 -4
Pennsylvania 20 21 19 19 0
Rhode Island 24 26 32 31 1
South Carolina 34 34 34 33 1
South Dakota 1 1 1 1 0
Tennessee 8 8 8 6 2
Texas 6 6 6 7 -1
Utah 10 10 10 10 0
Vermont 36 38 39 40 -1
Virginia 33 33 33 32 1
Washington 6 6 6 7 -1
West Virginia 29 29 28 28 0
Wisconsin 39 37 37 37 0
Wyoming 1 1 1 1 0
District of Columbia 47 47 48 48 0

Word: A rank of 1 is greatest, 50 is worst. All scores are for fiscal years. DC’s rating and rank don’t have an effect on different states.

Supply: Tax Basis.



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