State Individual Income Tax Rates and Brackets for 2022

Link:https://taxfoundation.org/state-income-tax-rates-2022

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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.

Author(s): Timothy Vermeer, Katherine Loughead

Publication Date: 15 Feb 2022

Publication Site: Tax Foundation

Massachusetts Should Reject Gross Receipts Taxes

Link:https://taxfoundation.org/massachusetts-gross-receipts-tax/

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The economic harms of the gross receipts tax (GRT) were well understood by the early 20th century. Not only is the tax inequitable, but it is also inefficient and distortionary. That is why most states abandoned GRTs in the early 1900s, as states developed the capacity to administer less harmful taxes. Unfortunately, some policymakers in Massachusetts want to turn back the clock.

Today, only a handful of states levy any variation of the GRT. Those that still rely on them as a significant source of revenue (like Texas, Nevada, Ohio, and Washington) typically do so in lieu of one or more alternative taxes. None of these states imposes a corporate income tax, and Ohio repealed several other business taxes as well when it adopted its GRT.

Some Massachusetts policymakers, however, want to layer a GRT atop the state’s existing corporate income tax. If H.2855 becomes law, it would reduce the competitiveness of the Bay State and increase prices for consumers on already expensive goods and services. To make matters worse, Bay Staters would be asked to shoulder the added tax burden at a time when inflation is already eroding purchasing power at a rate not seen 1982.

Author(s): Timothy Vermeer

Publication Date: 9 Feb 2022

Publication Site: Tax Foundation

Summary of the Latest Federal Income Tax Data, 2022 Update

Link: https://taxfoundation.org/summary-latest-federal-income-tax-data-2022-update?mc_cid=aeb8f14671&mc_eid=4737d05e09

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In 2019, taxpayers filed 148.3 million tax returns, reported earning nearly $11.9 trillion in adjusted gross income, and paid $1.6 trillion in individual income taxes.

The top 1 percent of taxpayers paid a 25.6 percent average individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.5 percent).

The share of reported income earned by the top 1 percent of taxpayers fell to 20.1 percent from 20.9 percent in 2018. The top 1 percent’s share of federal individual income taxes paid fell to 38.8 percent from 40.1 percent.

The top 50 percent of all taxpayers paid 97 percent of all individual income taxes, while the bottom 50 percent paid the remaining 3 percent.

The top 1 percent paid a greater share of individual income taxes (38.8 percent) than the bottom 90 percent combined (29.2 percent).

The Tax Cuts and Jobs Act reduced average tax rates across income groups.

Author(s): Erica York

Publication Date: 19 Jan 2022

Publication Site: Tax Foundation

Americans Moved to Low-Tax States in 2021

Link: https://taxfoundation.org/state-population-change-2021/

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Nationally, the U.S. population only grew by 0.1 percent between July 2020 and July 2021, the lowest rate since the nation’s founding. Pandemic-induced excess deaths, virtually nonexistent international in-migration, and an already-declining birth rate yielded an almost flat population trend nationwide. This, however, belies state-level and regional differences. Whereas the District of Columbia’s population shrunk by 2.8 percent between April 2020 (roughly the start of the pandemic) to July 2021, New York lost 1.8 percent of its population, and Illinois, Hawaii, and California rounded out the top five jurisdictions for population loss, Idaho was gaining 3.4 percent, while Utah, Montana, Arizona, South Carolina, Delaware, Texas, Nevada, Florida, and North Carolina all saw population gains of 1 percent or more.

The picture painted by this population shift is a clear one of people leaving high-tax, high-cost states for lower-tax, lower-cost alternatives. The individual income tax is only one component of overall tax burdens, but it is often highly salient, and is illustrative here. If we include the District of Columbia, then in the top one-third of states for population growth since the start of the pandemic (April 2020 to July 2021 data), the average combined top marginal state and local income tax rate is 3.5 percent, while in the bottom third of states, it is about 7.3 percent.

Author(s): Jared Walczak

Publication Date: 4 Jan 2022

Publication Site: Tax Foundation

Corporate Tax Rates around the World, 2021

Link:https://taxfoundation.org/corporate-tax-rates-by-country-2021/?

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In 2021, 20 countries made changes to their statutory corporate income tax rates. Three countries—Bangladesh, Argentina, and Gibraltar—increased their top corporate tax rates, while 17 countries—including Chile, Tunisia, and France—reduced their corporate tax rates.

Comoros (50 percent), Puerto Rico (37.5 percent), and Suriname (36 percent) are the jurisdictions with the highest corporate tax rates in the world, while Barbados (5.5 percent), Uzbekistan (7.5 percent), and Turkmenistan (8 percent) levy the lowest corporate rates. Fifteen jurisdictions do not impose corporate tax.

The worldwide average statutory corporate income tax rate, measured across 180 jurisdictions, is 23.54 percent. When weighted by GDP, the average statutory rate is 25.44 percent.

Asia has the lowest regional average rate, at 19.62 percent, while Africa has the highest regional average statutory rate, at 27.97 percent. However, when weighted for GDP, Europe has the lowest regional average rate at 23.97 percent and South America has the highest at 31.03 percent.

The average top corporate rate among EU27 countries is 21.30 percent, 23.04 percent among OECD countries, and 69 percent in the G7.

The worldwide average statutory corporate tax rate has consistently decreased since 1980, with the largest decline occurring in the early 2000s.

The average statutory corporate tax rate has declined in every region since 1980.

Author(s): Sean Bray

Publication Date: 9 Dec 2021

Publication Site: Tax Foundation

States Have $95 Billion to Restore their Unemployment Trust Funds—Why Aren’t They Using It?

Link:https://taxfoundation.org/state-unemployment-trust-funds-2021/

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States are permitted to replenish their unemployment compensation (UC) trust funds using the $195.3 billion they received in Fiscal Recovery Funds under the American Rescue Plan Act (ARPA)—and they need the help, having paid out $175 billion in state-funded benefits since the start of the pandemic, in addition to the $661 billion shelled out by the federal government in extended and expanded benefits, for a total of about $836 billion between January 27, 2020 and September 11, 2021.[1]

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Pre-pandemic trust fund balances stood at $72.5 billion. Today, aggregate trust fund balances are negative, at -$11.1 billion, reflecting $44.8 billion in indebtedness currently incurred by 10 states and the U.S. Virgin Islands. By federal standards, 34 state accounts are currently insolvent, with $114.6 billion needed to bring them all up to what the federal government regards as minimum adequate levels.

Author(s): Savanna Funkhouser, Jared Walczak

Publication Date: 22 Sept 2021

Publication Site: Tax Foundation

The tart truth underlying SALT repeal arguments

Link: https://www.washingtonpost.com/opinions/2021/09/18/tart-truth-underlying-salt-repeal-arguments/

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According to the Tax Foundation, just 13.7 percent of filers itemize their deductions — a prerequisite for deducting state and local taxes. Only at the top 10 percent of the income distribution do even a majority of taxpayers itemize. But among the top 1 percent of taxpayers, 92 percent do, and of course, their higher marginal tax rates make each deduction more valuable.

So it is these taxpayers whom the SALT deduction primarily benefits. According to Maya MacGuineas of the Committee for a Responsible Federal Budget, households in the top 0.1 percent of earners would receive an average benefit of about $150,000, while those in the middle would get closer to $15. Repealing the caps would cost about $350 billion by 2026, and an estimated 85 percent of that revenue would end up in the pockets of the richest 5 percent of Americans.

You can probably think of many better uses of taxpayer money than giving a tax break to the most affluent people in the most affluent parts of the most affluent states in the country. Unless, of course, you are someone who would benefit from a larger SALT deduction. As, I admit, I would.

Author(s): Megan McArdle

Publication Date: 18 Sept 2021

Publication Site: Washington Post

Where Do People Pay the Most in Property Taxes?

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Property taxes are the primary tool for financing local government and generate state-level revenue in some states as well. In fiscal year 2019, property taxes comprised 31 percent of total state and local tax collections in the United States, more than any other source of tax revenue. In that same year, property taxes accounted for 72 percent of local tax collections and 27 percent of overall local government revenue.

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The six counties with the highest median property tax payments all have bills exceeding $10,000—Bergen, Essex, and Union Counties in New Jersey, and Nassau, Rockland, and Westchester counties in New York. All six are near New York City, as is the next highest, Passaic County, New Jersey ($9,881). 

Author(s): Janelle Cammenga

Publication Date: 1 Sept 2021

Publication Site: Tax Foundation

How Does Your State Treat Social Security Income?

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Thirteen states tax Social Security benefits, a matter of significant interest to retirees. Each of these states has its own approach to determining what share of benefits is subject to tax, though these provisions can be grouped together into a few broad categories. Today’s map illustrates these approaches.

Author(s): Janelle Cammenga

Publication Date: 26 May 2021

Publication Site: Tax Foundation

Relaxing State and Local Tax Deduction Cap Would Make Tax Code Less Progressive

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All three options would primarily benefit higher-earning tax filers, with repeal of the SALT cap increasing the after-tax income of the top 1 percent by about 2.8 percent; the bottom 80 percent would see minimal benefit.

Removing the marriage penalty and raising the SALT cap would also mostly benefit higher earners, though after-tax incomes of filers in the 95th to 99th income percentiles would rise the most. For example, raising the SALT cap to $15,000 single and $30,000 joint would result in a 0.8 percent increase in after-tax income for the 95th to 99th income percentiles and a 0.4 percent increase for the top 1 percent.

The top 1 percent benefits less because the SALT cap remains in place, so there is less of a benefit as a portion of their incomes when slightly increasing the cap. For example, a joint filer with $5 million in after-tax income could receive an additional $7,400 in reduced tax liability ($20,000 in increased SALT deductions times the 37 percent top individual income tax rate), which is a 0.1 percent increase in after-tax income.

Author(s): Garrett Watson

Publication Date: 3 May 2021

Publication Site: Tax Foundation

How Are Your State’s Roads Funded?

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Traditionally, revenue dedicated to infrastructure spending has been raised through taxes on motor fuel, license fees, and tolls, but revenue from motor fuel has proven less effective over the last few decades. Between developments in vehicles’ fuel economy, increased sales of electric vehicles, and inflation, taxes on motor fuel generally raise less revenue per vehicle miles traveled (VMT) than they did in the past. As a result, most states contribute revenue from other sources to make up differences between infrastructure revenue and expenditures.

The amount of revenue states raise through taxes on infrastructure and transportation vary to a significant degree—as do the sources. Four states (California, Indiana, Montana, and Tennessee) raise enough revenue to cover their highway spending, but 46 states and the District of Columbia must cover the difference with tax revenue from other levies. Alaska (17 percent) and North Dakota (29 percent), which both rely heavily on revenue from severance taxes, raise the lowest proportion of highway funds from transportation taxes and fees.

Author(s): Ulrik Boesen

Publication Date: 21 April 2021

Publication Site: Tax Foundation

SALT Cap Tussle: NY Democrats Have an Ultimatum

Link: https://marypatcampbell.substack.com/p/salt-cap-tussle-ny-democrats-have

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It’s not just a matter of the state/local tax levels for each state, but also what income levels are like for the state.

In any case, the pattern of which states’ taxpayers get the biggest boost from SALT deductibility might surprise you a little, such as with Utah and Georgia. But many aren’t surprising at all, such as New York and New Jersey.

But even without considering the geographical footprint, obviously high-income folks get the biggest boost from removing the SALT cap. This has been known since the TCJA back in 2017 when they imposed the cap to begin with. It’s partly why it was done.

Author(s): Mary Pat Campbell

Publication Date: 15 April 2021

Publication Site: STUMP at substack