States with the highest income tax rates as of tax year 2014 were California, Hawaii, Oregon, Minnesota and Iowa, reports Intuit. Other states and districts that complete the top 10 list of states with the highest income tax include New Jersey, Vermont, the District of Columbia, New York and Maine.Continue Reading
The way income taxes are computed in all these states varies according to tax regulations, personal income tax base, exemptions and what constitutes taxable income, all which affect what individuals pay, says Intuit. The highest income tax rates are 13.5 percent for California, 11 percent for Hawaii, 9.9 percent for Oregon, 9.85 percent for Minnesota and 8.98 percent for Iowa. On the opposite end of the spectrum, seven states – including two of the largest states, Texas and Florida – charge no income tax at all. Municipalities in such states raise funds for essential services in other ways, such as sales and property taxes and taxes on various commodities, such as gasoline, tobacco and liquor.
Some states offer a flat income tax in which all taxpayers are charged the same rate, while other states have progressive systems in which different incomes are taxed at different levels, states the Tax Foundation. So, for instance, California's high rate applies only to those individuals making a million dollars a year or more. Low-income earners may pay as little as 2 percent of their incomes in state taxes.Learn more about Income Tax