In this article, we will look at 20 states where tax filers are paying the highest percentage of their income. If you want to skip our detailed analysis, head straight to 5 States Where Tax Filers Are Paying the Highest Percentage of Their Income.
American Income Taxes: An Analysis
The taxes paid by US citizens across all the states are different. The states with the highest income taxes in the US are the ones where tax filers are paying the highest percentage of their income. The US tax system has made legislative changes and several states have gone through income tax cuts in 2024. Overall, thirty-four states went through notable tax changes, which took effect on January 1, 2024. Two states including California and Michigan have increased their income tax rates from 13.30% and 4.05% to 14.40% and 4.25% in 2024, respectively. Most of the states in the US have taken legislative measures to reduce their taxes and will gradually bring them into effect in the coming years. There are already several states in the US with no sales tax or income tax.
In 2023, the US federal government collected a total revenue of almost $4.44 trillion, as per the US Treasury. The primary source of revenue was personal income taxes. In fiscal year 2024 so far, the US federal government has gathered $1.58 trillion in revenue from October 2023 to January 2024. Almost 51% of the revenue is contributed by personal income taxes, which accounts for $808 billion of the total revenue in 2024 so far. Corporate income taxes have added nearly 10.70% to the federal government revenue in 2024. Compared to the fiscal year 2023, the federal government collected $1.47 trillion in revenue between October 2022 and January 2023. The federal government has spent nearly $2.12 trillion since the start of fiscal year 2024 compared to a total spending of $1.93 trillion for the same period in fiscal year 2023. The deficit in this fiscal year has added to the country’s national debt of $34.27 trillion through February 15, 2024. To cover the deficit, the federal government borrows additional funds that lead to a further increase in national debt.
For the tax year 2024, the Internal Revenue Service (IRS) has gone through approximately 60 tax provisions. The changes in tax year 2024 will apply to tax filers in 2025. The individual taxpayers continue to have the same top tax rate at 37% from 2023 with income greater than $609,350. Married couples filing jointly also have a top tax rate of 37% with income higher than $731,200. The minimum income tax rate for individual taxpayers is 10% with an income of $11,600 or less. Other tax rates for individual taxpayers and married couples filing jointly are 35%, 32%, 24%, 22%, and 12%. Among the 60 tax provisions for 2024, the IRS has raised the standard deduction to $14,600 for individual taxpayers and married individuals filing separately, rising by $750 from tax year 2023. The IRS has increased the standard deduction to $29,200 for married couples filing jointly, an increase of $1,500 from tax year 2023. The personal exemption stays at zero for the tax year 2024.
American Tax Services Providers
Tax services providers offer a wide range of consultancy and other services. H&R Block, Inc. (NYSE:HRB), Intuit Inc. (NASDAQ:INTU), and CBIZ, Inc. (NYSE:CBZ) are some of the leading tax services providers in the world.
H&R Block, Inc. (NYSE:HRB) is a top tax preparation company based out of the US. On February 6, H&R Block, Inc. (NYSE:HRB) announced that Chief Financial Officer Tony Bowen has decided to retire. Bowen will stay at the company until September 2024, committed to a smooth transition. On February 6, the company also reported its second quarter results for 2024. H&R Block, Inc. (NYSE:HRB) reported a revenue of $179.08 million, beating consensus estimates by $9.63 million. Here are some of the comments from the Q2 2024 earnings call:
“Turning to Q2 results, performance continues to meet expectations, and, today, we reaffirmed our fiscal year outlook. In the quarter, revenue grew 8% as we had a strong finish to the extended filing season. In addition, we saw consumers in need of cash, and many turned to H&R Block to meet their financial needs with our new Emerald Advance offering, which we believe bodes well for the tax season.”
CBIZ, Inc. (NYSE:CBZ) is a leading provider of financial, insurance, and advisory services. On February 7, CBIZ, Inc. (NYSE:CBZ) announced that it has acquired tax and accounting services provider, Erickson, Brown & Kloster, LLC (EBK). EBK offers tax and accounting services to various business segments including wholesale, real estate, automotive, and medical services, among others. In 2023, EBK reported a revenue of approximately $8.9 million.
Intuit Inc. (NASDAQ:INTU) is a leading global financial technology firm that owns Intuit Credit Karma, TurboTax, QuickBooks, and Mailchimp. On February 7, Intuit Inc. (NASDAQ:INTU) announced that it is collaborating with Khan Academy to provide free financial education tools to educators and students. Through this initiative with Khan Academy, Intuit Inc. (NASDAQ:INTU) is planning to engage 50 million students with free learning resources by 2030.
Now, let’s take a look at the states where tax filers are paying the highest percentage of their income.
20 States Where Tax Filers Are Paying the Highest Percentage of Their Income
Our Methodology
To compile our list of the states where tax filers are paying the highest percentage of their income, we shortlisted the top 20 states with the highest personal income tax rates, as of 2024. We have used top-end personal income tax rates. Secondly, we have used the per capita income of states which gives an idea of the income level of the state. We have ranked the lists based on their top personal income tax rate. We have used per capita income of states as a tie-breaker. The data for personal income tax rates was taken from the Tax Foundation and the per capita income for each state was taken from the US Census Bureau database. The data for per capita income was available till 2022.
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Note: Though ‘The District of Columbia (DC)’ is not a state, it is not part of any state either. We have listed DC among the states where tax filers are paying the highest percentage of their income.
20 States Where Tax Filers Are Paying the Highest Percentage of Their Income
20. Idaho
Per Capita Income (2022): $34,919
Personal Income Tax Rate (2024): 5.80%
Idaho has a per capita income of $34,919 and a personal income tax rate of 5.80%. Idaho ranks 20th among the states where tax filers are paying the highest percentage of their income.
19. Nebraska
Per Capita Income (2022): $38,585
Personal Income Tax Rate (2024): 5.84%
Nebraska has a per capita income of $38,585 and a personal income tax rate of 5.84%. Nebraska is one of the top states with a high income tax rate.
18. New Mexico
Per Capita Income (2022): $32,667
Personal Income Tax Rate (2024): 5.90%
New Mexico has a 5.90% personal income tax rate and a per capita income of $32,667. New Mexico is one of the states where tax filers are paying the highest percentage of their income.
17. Montana
Per Capita Income (2022): $37,837
Personal Income Tax Rate (2024): 5.90%
Montana is placed 17th among the states where tax filers are paying the highest percentage of their income. Montana has a personal income tax rate of 5.90% and a per capita income of $37,837.
16. Rhode Island
Per Capita Income (2022): $43,324
Personal Income Tax Rate (2024): 5.99%
The taxpayers in Rhode Island have to pay a top tax of 5.99% on their personal incomes. Rhode Island has a per capita income of $43,324 and ranks among the states where tax filers are paying the highest percentage of their income.
15. South Carolina
Per Capita Income (2022): $36,072
Personal Income Tax Rate (2024): 6.40%
South Carolina has a per capita income of $36,072 and a personal income tax rate of 6.40%. South Carolina is one of the states where tax filers are paying the highest percentage of their income.
14. West Virginia
Per Capita Income (2022): $31,462
Personal Income Tax Rate (2024): 6.50%
West Virginia has a personal income tax rate of 6.50% and a per capita income of $31,462.
13. Delaware
Per Capita Income (2022): $42,180
Personal Income Tax Rate (2024): 6.60%
Delaware has a per capita income of $42,180 and a personal income tax rate of 6.60%. Delaware is one of the top states with the highest income tax rates in the US.
12. Connecticut
Per Capita Income (2022): $52,034
Personal Income Tax Rate (2024): 6.99%
Connecticut has a per capita income of $52,034 and a personal income tax rate of 6.99%. Connecticut is one of the states where tax filers are paying the highest percentage of their income.
11. Maine
Per Capita Income (2022): $39,718
Personal Income Tax Rate (2024): 7.15%
Maine has a per capita income of $39,718 and a personal income tax rate of 7.15%. Maine ranks 11th among the states where tax filers are paying the highest percentage of their income.
10. Wisconsin
Per Capita Income (2022): $40,130
Personal Income Tax Rate (2024): 7.65%
Wisconsin has a per capita income of $40,130 and a personal income tax rate of 7.65%. Wisconsin is one of the top states with the highest income tax rates in the US.
9. Vermont
Per Capita Income (2022): $41,680
Personal Income Tax Rate (2024): 8.75%
Vermont has a personal income tax rate of 8.75% and a per capita income of $41,680. Vermont is placed ninth among the states where tax filers are paying the highest percentage of their income.
8. Massachusetts
Per Capita Income (2022): $53,513
Personal Income Tax Rate (2024): 9%
Massachusetts ranks eighth among the states where tax filers are paying the highest percentage of their income. Massachusetts has a personal income tax rate of 9% and a per capita income of $53,513.
7. Minnesota
Per Capita Income (2022): $44,947
Personal Income Tax Rate (2024): 9.85%
Minnesota has a per capita income of $44,947 and a personal income tax rate of 9.85%. Minnesota is one of the top states with the highest income tax rates in the US.
6. Oregon
Per Capita Income (2022): $41,805
Personal Income Tax Rate (2024): 9.90%
Oregon has a per capita income of $41,805 and a personal income tax rate of 9.90%. Oregon is one of the states where tax filers are paying the highest percentage of their income.
Click here to see 5 States Where Tax Filers Are Paying the Highest Percentage of Their Income.
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Disclosure: None. 20 States Where Tax Filers Are Paying the Highest Percentage of Their Income is originally published on Insider Monkey.