The States With the Highest Income Taxes

There's little time left until taxes are due. While seven states have no income tax, 43 states and D.C. do. Most states use some type of progressive tax on income so that people with higher incomes pay higher rates, and that makes calculating how much you owe to be quite a hassle.

Let's look at what your income-tax burden would be if you were filing independently with an income of $100,000, as simply looking at a state's absolute highest income-tax rate can offer a distorted picture.

The Highest Income Taxes for Income of $100,000

 Rank

State

Average Tax Rate at $100,000

Marginal Tax Rate at $100,000

1

Oregon

8.04%

9%

2

Hawaii

7.25%

8.25%

3

Maine

7.06%

8.5%

4

District of Columbia

6.99%

8.5%

5

North Carolina

6.78%

7.75%

6

California

6.59%

9.3%

7

Idaho

6.44%

7.4%

Sources: Tax Foundation, author's calculations.

While these states (and D.C.) have high income taxes, everyone's situation is different. In some cases, a life of paying fewer taxes is as simple as picking up and moving across state lines. Before you do, though, you should take into consideration how each state makes money, and you'll also want to figure in local taxes and how those will affect your particular situation. A good place to start is the Tax Foundation, which has been collecting data on taxes since 1937 and takes into consideration an average of both state and local taxes.

The tax leaders
Let's go through the states with the highest income tax one by one, using the Tax Foundation's most recent data, which is from July 2012.

1. Oregon
Oregon ranks first on our list, with a progressive income tax that starts at 5%, rises to 7% at income above $3,150 and 9% above $7,950, and tops out at 9.9% on income above $125,000. It is one of six states that allow taxpayers to deduct their federal income tax from their taxable income, though it caps the deduction at $5,950.

2. Hawaii
Hawaii has a progressive income tax that starts at 1.4%, rises multiple times till it hits 8.25% at $48,000, and then climbs a few more times till it hits 11% at income above $200,000. Hawaii's 11% marginal tax rate is the highest of any state.

3. Maine
Maine also has a progressive tax that starts at 2% and then after a few tiers peaks at a rate of 8.5% on income above $20,350.

4. D.C.
While the District of Columbia is not a state, much to the angst of its residents, it still levies a progressive income tax that starts at 2%, rises to 6% for income above $10,000, and then climbs to 8.5% for income above $40,000. The rate peaks at 8.95% for income above $350,000.

5. North Carolina
North Carolina's progressive tax that starts at 6%, rises to 7% for income above $12,750, and peaks at 7.75% for income above $60,000.

6. California
California has a progressive income tax that starts at 1% and then rises multiple times before it hits 9.3% on income above $48,029. The rate rises higher for those earning more than $1 million, to 10.3%, the second highest state marginal rate behind Hawaii's 11%.

7. Idaho
Seventh on our list is Idaho, which has a progressive tax that starts at 1.6% and rises multiple times before peaking at 7.4% on income above $10,350.

It's not all about taxes
Again, if you're thinking about moving to avoid a big tax hit, there's more to consider than just tax rates -- but it doesn't hurt to start there, especially if you're living off interest and dividends.

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Read/Post Comments (13) | Recommend This Article (16)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 14, 2013, at 10:43 AM, Phils456 wrote:

    I have lived in Oregon for 40 years. Yes we have a high state income tax but what this article doesn't tell you is we have NO sales tax.

  • Report this Comment On April 14, 2013, at 10:45 AM, amysname wrote:

    California has one of the highest tax rates and some of the worst POT HOLES in their roads! The money is wasted by the Socialists in Sacramento but they promise "free stuff" so they get voted back in.....pathetic! The thing is when they run out of money from the so called rich they will be going after EVERYONE!

  • Report this Comment On April 14, 2013, at 11:09 AM, CalDad wrote:

    Poor research. California prop 30 retroactive to Jan 1 2012 raised the top rate to 13% above $250k

    Add 8.25 sales tax to the highest gas taxes for a more complete picture

  • Report this Comment On April 14, 2013, at 11:39 AM, echebethan wrote:

    Uhhh, I think the writer really needs to do their research because Idaho does NOT have income taxes that high. Especially since the state usually only takes about .5% of my paycheck depending on my income. The writer also does not tell you that at the end of the year, most residence of Idaho receive a grocery tax credit depending on income, since our sales tax does include food.

    Idaho should get rid of the income tax entirely and have a sales tax of 7-7.5% on all goods and SERVICES sold in Idaho, except FOOD!

  • Report this Comment On April 14, 2013, at 11:41 AM, Pray4Peace wrote:

    California, the State of Higher Incarceration, has to pay for prisoners it packs in like feedlot cattle. FOLLOW THE MONEY. Old school politicians hocking tough-on-crime in hopes of votes and other prison profiteers practically bankrupted the state.

    The huge prison crisis negatively impacts every U.S. citizen though lowered funding for education, infrastructure, safety, and so on. Let's fix it with programs such as the conservatives "Right on Crime".

  • Report this Comment On April 14, 2013, at 11:52 AM, flyingdals wrote:

    When I was in Iowa - they had a sliding rate that could be as high as 10%. One reason I live in Michigan (4.3%).

  • Report this Comment On April 14, 2013, at 12:13 PM, relve wrote:

    Well, this explains a lot about the hippy/lowlifes living in the hills of southern Josephine County! So they can still collect the meager welfare checks, grow their pot throughout their property, log off the remainder of trees they used to hug @ $50 a pop and then hide their drug crop under cover of the wild blackberries that appear after the trees are cleared...plus they pay no sales tax. So what motivation is there to be honest? None! And the county teeters at the edge of bankruptcy...

  • Report this Comment On April 14, 2013, at 12:30 PM, FLOYDINFLORIDA wrote:

    I Knew North Carolina was extremely high! When I was stationed there in the Army! They tax everything, your dog, cat even you damnnn Lawn mower!

    Glad to have retired and escaped from that he|| hole! The Socialist State of North Carolina is the worst the South has to offer You people from Massachusetts should be right a home there!

  • Report this Comment On April 14, 2013, at 12:47 PM, FLOYDINFLORIDA wrote:

    California is high to pay for the illegal Aliens!

    Oregon is high to keep out the Californians?

    North Carolina is high to keep out Southerners!

    Maine is high because they love it and it works for them?

    Idaho is high because you can't live on just spuds alone?

    This is not the Big Picture as you have to take Sales tax, Property tax, Fees and all other kinds of B/S Into consideration!

    What we need to know is what The Goldilocks Zone States are?

  • Report this Comment On April 15, 2013, at 7:54 PM, jan75 wrote:

    I don't really understand your methodology. First you say you are looking at states with highest tax burdens at $100,000. Then you list North Carolina which has a lower tax burden than Minnesota (7.75 vs 7.85) and then go on to discuss rates for over $300,000 without looking at several states that have higher rates in that range.For articles of this type this is an atypical list of states because you didn't consistently stick with your stated parameters.

  • Report this Comment On April 16, 2013, at 12:46 AM, starcreek wrote:

    Your out of date on your California rates. The top rate is now 14%+.

    We're #1

  • Report this Comment On April 16, 2013, at 5:38 PM, bretco wrote:

    Agreed, meaningless info without all the other tax burdens considered. Expect better from a Fool writer,

  • Report this Comment On April 17, 2013, at 2:05 PM, GetMeTheBigKnife wrote:

    Although it's a flawed and incomplete article, he did say he used data based on July 2012 reports from the Tax Foundation.

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