Key Findings

• Individual income taxes are a major source of state government revenue, accounting for 36 percent of state tax collections in fiscal year 2020, the latest year for which data are available.
• Forty-two states levy individual income taxes. Forty-one tax wage and salary income, while one state—New Hampshire—exclusively taxes dividend and interest income. Eight states levy no individual income tax at all.
• Of those states taxing wages, nine have single-rate tax structures, with one rate applying to all taxable income. Conversely, 32 states and the District of Columbia levy graduated-rate income taxes, with the number of brackets varying widely by state. Hawaii has 12 brackets, the most in the country.
• States’ approaches to income taxes vary in other details as well. Some states double their single-bracket widths for married filers to avoid a “marriage penalty.” Some states index tax brackets, exemptions, and deductions for inflation; many others do not. Some states tie their standard deductions and personal exemptions to the federal tax code, while others set their own or offer none at all.

Individual income taxes are a major source of state government revenue, accounting for 36 percent of state tax collections. Their prominence in public policy considerations is further enhanced in that individuals are actively responsible for filing their income taxes, in contrast to the indirect payment of sales and excise taxes.

Forty-two states levy individual income taxes. Forty-one tax wage and salary income, while one state—New Hampshire—exclusively taxes dividend and interest income. Eight states levy no individual income tax at all.

Of those states taxing wages, nine have single-rate tax structures, with one rate applying to all taxable income. Conversely, 32 states and the District of Columbia levy graduated-rate income taxes, with the number of brackets varying widely by state. Kansas, for example, is one of several states imposing a three-bracket income tax system. At the other end of the spectrum, Hawaii has 12 brackets. Top marginal rates range from North Dakota’s 2.9 percent to California’s 13.3 percent.

In some states, a large number of brackets are clustered within a narrow income band. For example, Georgia’s taxpayers reach the state’s sixth and highest bracket at $7,000 in taxable income. In other states, the top rate kicks in at a much higher level of marginal income. For example, the top rate kicks in at $1 million or more in California (when the “millionaire’s tax” surcharge is included), as well as in New Jersey, New York, and the District of Columbia. In New York, an additional top rate for income exceeding $25 million was enacted during the 2021 legislative session.

Table 1 shows how each state’s individual income tax is structured.

States’ approaches to income taxes vary in other details as well. Some states double their single filer bracket widths for married filers to avoid imposing a “marriage penalty.” Some states index tax brackets, exemptions, and deductions for inflation, while many others do not.^[2] Some states tie their standard deductions and personal exemptions to the federal tax code, while others set their own or offer none at all.

The federal Tax Cuts and Jobs Act of 2017 (TCJA) increased the standard deduction (set at $12,950 for single filers and $25,900 for joint filers in 2022) while suspending the personal exemption by reducing it to $0 through 2025. Because many states use the federal tax code as the starting point for their own standard deduction and personal exemption calculations, some states that previously coupled to these provisions in the federal tax code have updated their conformity statutes in recent years to either adopt federal changes, retain their previous deduction and exemption amounts, or retain their own separate system but increase the state-provided deduction or exemption amounts.

In the following tables we have compiled the most up-to-date data available on state individual income tax rates, brackets, standard deductions, and personal exemptions for both single and joint filers. After the tables, we document notable individual income tax changes implemented in 2022.

Notable 2022 State Individual Income Tax Changes

Last year was a historic year for income tax rate reductions, with more states reducing their individual income tax rates in a single year than the U.S. has seen since the years following the federal tax reform of 1986. In 2021 alone, 13 states enacted or implemented individual income tax rate reductions. Some of these rate reductions were effective starting January 1, 2022; some were retroactive to January 1, 2021; and others are scheduled to take effect in the future. Some of the scheduled future rate reductions rely on tax triggers, where rate reductions will occur once certain revenue benchmarks are met. Other rate reductions are set to occur on specific future dates, with rates phasing down incrementally over time.

New York and the District of Columbia were the only jurisdictions to enact individual income tax rate increases in 2021.

Notable changes to major individual income tax provisions include the following:

Arizona

Arizona’s 2022 tax changes are among the nation’s most complex, as they involve—among other things—the unwinding of a prior ballot measure. Proposition 208 (2020) had created a 3.5 percent high earners tax atop the state’s existing 4.5 percent top marginal income tax rate, functionally yielding a new top rate of 8 percent. Lawmakers effectively undid the ratification through legislation, lowering the base rates to ensure that the combined top rate never exceeded 4.5 percent. They simultaneously adopted revenue triggers that could create a lower, single-rate tax.

Senate Bill 1828 would have begun the state’s conversion from a graduated individual income tax to a flat individual income tax on January 1, 2022.[3] The transition would have initially collapsed the four current tax brackets into two. Single tax filers with taxable income up to $27,272 (double if filing jointly) would have been taxed at a rate of 2.55 percent. Any taxable income exceeding that amount would have been taxed at a rate of 2.98 percent. Pending revenue triggers, the tax would eventually have been reduced to 2.5 percent, regardless of income level. However, enough signatures were gathered via petition that voters will now be asked to approve or reject the flat tax via ballot measure (Proposition 307) in the November 2022 election. In the meantime, implementation of S.B. 1828 has been suspended.

Pending the outcome of Proposition 307, Arizona’s top marginal rate is capped at 4.5 percent, even though a final decision on Proposition 208 is still pending judicial review.[4] Since the Arizona Supreme Court refused to suspend the law[5] while a lower court adjudicates details pertaining to the measure’s revenue allocation, the surtax remains in effect. Therefore, policymakers enacted S.B. 1827 to counteract the effects of Proposition 208 by automatically reducing the top marginal individual income tax rate by an amount that would keep the combined surtax and top rate from exceeding 4.5 percent.

Finally, under provisions of H.B. 2838,^[6] Arizona will allow partnerships, limited liability companies (LLCs), and S corporations to pay a 4.5 percent tax at the entity level instead of having all business-related income pass through to the individual income tax. The law was passed as a SALT deduction cap workaround.[7]

Arkansas

Arkansas’s top individual income tax rate declined from 5.9 percent to 5.5 percent as a result of legislation passed during the state’s December 2021 special session.[8] Many states have multiple tax brackets, but Arkansas is unique in having entirely different tax rate schedules that vary according to income level. In 2022, the tax rate for nearly every low- and middle-income earner was reduced as legislators voted to collapse the two lower tax tables into one.

District of Columbia

As of January 1, 2022, Washington, D.C.’s individual income tax changed considerably. Enacted via the Fiscal Year 2022 Budget Support Act of 2021, the District increased the number of tax brackets from six to seven and altered many of the thresholds.[9] Changes begin for individuals with a D.C. taxable income between $250,000 and $500,000. They are assessed a tax of $19,560 plus 9.25 percent of the excess over $250,000. Those with taxable income over $500,000 but not over $1 million will pay $42,775 plus 9.75 percent of the excess over $500,000. Finally, individuals with taxable income over $1 million will be taxed $91,525 plus 10.75 percent on any amount over $1 million.

Georgia

On March 22, 2021, Georgia enacted H.B. 593, which increased the standard deduction for single filers from $4,600 to $5,400 in tax year 2022.[10]  The standard deduction for joint filers increased from $6,000 to $7,100.

Idaho

On May 10, 2021, Governor Brad Little (R) signed H.B. 380, reducing the state’s top marginal individual income tax rate from 6.925 to 6.5 percent while consolidating seven individual income tax brackets into five. These changes were retroactive to January 1, 2021. Under H.B. 380, Idaho’s top marginal individual income tax rate and third-lowest rate were both eliminated. The remaining rates were each reduced by 0.125 percentage points, except for the second-lowest rate, which was reduced by 0.025 percentage points.

On February 4, 2022, Governor Little signed H.B. 436, which further consolidates Montana’s five tax brackets to four.[11]  Under the new law, which is retroactive to January 1, 2022, the 5.5 percent bracket was eliminated, and the second-lowest rate was reduced from 3.1 percent to 3.0 percent. The top marginal rate remains at 6.5 percent.

Kansas

Kansas enacted S.B. 50, which increased the standard deduction for single filers from $3,000 to $3,500. Joint filers’ standard deduction will increase from $7,500 to $8,000. The change was made retroactive to tax year 2021.

Louisiana

Louisiana’s individual income tax looks significantly different than it did in 2021. With the approval of Amendment No. 2 in the general election held November 13, 2021,[12] the maximum individual income tax rate permitted by the state constitution decreased from 6 percent to 4.75 percent.[13] Contingent legislation then reduced individual income tax rates from 2 percent, 4 percent, and 6 percent to 1.85 percent, 3.5 percent, and 4.25 percent, respectively.[14] As of the first of the year, Louisiana’s top marginal rate is the fifth-lowest in the nation. Prior to 2022, the Pelican State’s top rate ranked 25th.

Mississippi

As of January 1, 2022, Mississippi has completed the phaseout of its 3 percent individual income tax brackets. The state has been slowly eliminating its lowest tax bracket by exempting $1,000 increments every year since 2018. The Magnolia State now effectively exempts the first $5,000 of taxable income while assessing a 4 percent tax on the next $5,000 and a 5 percent tax on all taxable income above $5,000.

Montana

Under S.B. 159, enacted on May 6, 2021, Montana’s top marginal individual income tax rate was reduced from 6.9 to 6.75 percent on January 1, 2022.[15] Additional changes enacted via S.B. 399 will take effect in subsequent years.[16] These include consolidating the state’s seven individual income tax brackets into two, with rates of 4.7 and 6.5 percent by 2024. The state will also adopt federal taxable income as the income tax starting point, thereby bringing in the federal standard deduction. Importantly, S.B. 399 will double the bracket widths for married filers, thereby removing the marriage penalty that currently exists in the state’s income tax code.

New York

While the change is retroactive to January 1, 2021, New York’s individual income tax increase is notable as one of only two individual income tax rate increases implemented in the last year. As part of the FY 2022 Enacted Budget Bill, New York’s top marginal rate for individual income taxation increased from 8.2 percent to 10.9 percent. Importantly, two tax brackets were added to the individual income tax code. Individuals are now assessed a tax of 9.65 percent on New York taxable income greater than $1,616,450 but not more than $5 million. Individuals are also subject to a 10.3 percent tax on taxable income greater than $5 million but not more than $25 million. Any taxable income exceeding $25 million is subject to the top marginal rate of 10.9 percent.

Those earning between $13,900 and $215,400 are subject to marginal tax decreases as the corresponding rates decreased from 5.9 percent and 6.33 percent to 5.85 percent and 6.25 percent, respectively. The 5.97 percent marginal rate on income between $21,400 and $80,650 was eliminated.

North Carolina

Under provisions of North Carolina’s biennial budget bill signed by Governor Roy Cooper (D) on November 18, 2021, the state’s flat income tax rate was reduced to 4.99 percent on January 1, 2022.[17] This is the first of six incremental reductions that will ultimately reduce the rate to 3.99 percent by tax year 2027.

Ohio

On July 1, 2021, Governor Mike DeWine (R) signed H.B. 110, the budget for the FY 2022-23 biennium. The law consolidated the state’s previous five individual income tax brackets into four and reduced each of the rates retroactive to January 1, 2021.[18] Specifically, the law reduced the top marginal rate from 4.797 to 3.99 percent and reduced the other rates by 3 percent across the board. The income level at which the first tax rate kicks in is also increased from $22,150 to $25,000, providing targeted tax relief at the lower end of the income spectrum.[19]

Oklahoma

Oklahoma implemented numerous changes to the individual income tax in 2022 including an across-the-board rate reduction of 0.25 percent.[20] The top rate declined from 5 to 4.75 percent, making it the ninth-lowest top marginal rate among states that levy an individual income tax. The same law also restored the refundability of the state’s earned income tax credit (EITC), which was made nonrefundable in 2016.

Wisconsin

On July 8, 2021, Gov. Tony Evers (D) approved the biennial budget for FYs 2022-23 (A.B. 68) with partial vetoes.[21] One of the approved provisions in the budget was a reduction of the second-highest individual income tax rate from 6.27 to 5.3 percent, retroactive to January 1, 2021. At 6.27 percent, Wisconsin’s penultimate individual income tax rate was higher than the top marginal rates in 23 states that levy an individual income tax. Kicking in at just over $24,000 in taxable income for single filers and $32,000 for married couples, Wisconsin’s second-highest rate affects the vast majority of the state’s taxpayers, with most paying more in income taxes to Wisconsin than they would with the same amount of income in most other states.

[1] U.S. Census Bureau, “2020 State Government Tax Tables,” Fiscal Year 2020, https://www.census.gov/data/tables/2020/econ/stc/2020-annual.html

[2] See Jared Walczak, “Inflation Adjusting State Tax Codes: A Primer,” Tax Foundation, Oct. 29, 2019, https://www.taxfoundation.org/inflation-adjusting-state-tax-codes/.

[3] S.B. 1828, 55th Leg., First Reg. Sess. (Ariz., 2021), https://www.azleg.gov/legtext/55leg/1R/bills/SB1828S.pdf.

[4] Howard Fischer, “Court Rules Prop 208 Surcharge Can Stay – For Now,” Arizona Capitol Times, Aug. 19, 2021, https://www.azcapitoltimes.com/news/2021/08/1t9/court-rules-prop-208-surcharge-can-stay-for-now/.

[5] Fann v. Arizona, 493 P.3d 246 (Ariz., 2021).

[6] H.B. 2838, 55th Leg., First Reg. Sess. (Ariz., 2021,) https://apps.azleg.gov/BillStatus/GetDocumentPdf/490546.

[7] Ibid.

[8] S.B. 1, 93rd Gen. Assy., Second Spec. Sess. (Ark., 2021). https://www.arkleg.state.ar.us/Bills/FTPDocument?path=%2FBills%2F2021S2%2FPublic%2FSB1.pdf.

[9] See Bill 24-285, “Amendment in the Nature of a Substitute” (D.C., 2021).

[10] H.B. 593, 2021 Gen. Assy., Reg. Sess. (Ga, 2021).

[11] H.B. 436, 66th Leg., Second Reg. Sess. (Idaho, 2022).

[12] See Louisiana Secretary of State, “Statement of Proposed Constitutional Amendments October 9, 2021,” https://www.sos.la.gov/ElectionsAndVoting/PublishedDocuments/ProposedConstitutionalAmendments2021Summaries.pdf.

[13] S.B. 159, 2021 Leg., Reg. Sess. (La, 2021).

[14] H.B. 278, 2021 Leg., Reg. Sess. (La, 2021).

[15] S.B. 159, 67th Leg., Reg. Sess. (Mont, 2021).

[16] S.B. 399, 67th Leg., Reg. Sess. (Mont, 2021).

[17] S.B. 105, 2021 Gen. Assy., Reg. Sess. (N.C., 2021).

[18] Ulrik Boesen, “Ohio Lawmakers Agree on Income Tax Cuts and Remote Work Tax Relief,” Tax Foundation, June 30, 2021, https://www.taxfoundation.org/ohio-budget-tax-cuts/.

[19] Paul Williams, “Ohio Enacts Budget With $1.6B Tax Cuts, Teleworker Refunds,” Law360, July 1, 2021, https://www.law360.com/tax-authority/articles/1399539/ohio-enacts-budget-with-1-6b-tax-cuts-teleworker-refunds-.

[20] H.B. 2962, 2021 Leg., Reg. Sess. (Okla., 2021).

[21] A.B. 68, 2021 Assy., Reg. Sess. (Wis, 2021).