Features of State Individual Income Taxes

Of the 50 states and the District of Columbia, 42 apply a broad-based individual income tax. However, the various features of the individual income taxes vary by state. A brief summary of the tax rates, number of brackets, expanse of brackets, and minimum income exempted from taxation follows.

Tax Rates

The rates at which income is taxed vary substantially across the 42 state-level income taxes.

Five states impose a lowest tax rate of 0.0 percent, effectively exempting some fraction of taxable income. An additional nine states impose a lowest tax rate above 0.0 percent but less than 2.0 percent.

Twelve states, including Kansas, impose an initial rate between 2.0 and 3.5 percent. An additional 13 states impose a lowest tax rate between 3.5 and 5.0 percent. Minnesota, Maine, and Idaho impose initial tax rates above 5.0 percent, with Maine and Idaho imposing the highest initial rates at 5.8 percent.

In terms of highest tax rates imposed, five states keep income tax rates below 4.0 percent. Thirteen states tax above 4.0 percent, but not in excess of 5.0 percent. Ten states, including Kansas, utilize maximum rates between 5.0 and 6.5 percent. Nine states utilize rates between 6.5 percent and 10.0 percent. Five states utilize maximum rates in excess of 10 percent, with California being the highest state income tax rate in the country at 12.3 percent.

Number of Tax Brackets

Tax brackets are means by which income tax may be imposed at different rates on different ranges of income.

Of the 42 state-level income taxes, 11 states impose a single-bracket, or flat rate, income tax. An additional state, Mississippi, effectively imposes a flat rate tax, as it imposes two tax brackets, the lower of which is taxed at 0.0 percent. No other states utilize a true two-bracket system.

Seven states, including Kansas, impose three income tax brackets. However, one of these states, South Carolina, effectively imposes a two-bracket system by virtue of a 0.0 percent lower bracket rate.

Eleven states utilize tax bracket structures with four or five brackets. Nine states impose tax structures with six, seven, or eight brackets. Three states utilize more than eight brackets, with Hawaii having the greatest number of brackets with 12.

Expanse of Brackets

In addition to the number of brackets, the distribution of income within brackets impacts state tax policy. Of the 30 states with more than one tax rate, five states have a lower bound of their upper tax bracket of less than $10,000 of taxable income for single individuals. Accordingly, these states tax a greater share of income at their highest rates.
Five states have lower bounds of their upper brackets for single individuals between $15,000 and $50,000. Kansas falls into this group, with its upper bracket beginning at $30,001 of taxable income. An additional five states begin their highest rate between $50,001 and $100,000, with five more states using thresholds between $100,001 and $200,000.

Seven states begin their highest tax rate above $200,001 but below $1.0 million. The District of Columbia and New Jersey impose their highest rates on incomes over $1.0 million, and New York begins imposing its highest tax rate at $25.0 million of taxable income.

Minimum Exempted Income

With the exception of Pennsylvania, all states with an income tax exempt some initial income from taxation through the use of either personal exemption amounts, standard or itemized deductions, or both. For single individuals, 13 states exempt up to $5,000. Ten states, including Kansas, exempt between $5,001 and $10,000 of income. Fourteen states exempt more than $10,000 but less than $15,000. Four states exempt at least $15,000 of income for single individuals, including California, which effectively exempts $19,202 of income through a combined personal exemption tax credit and a standard deduction.