Included inside, my YES on Prop 56 plea to Californians, even if they don't want higher taxes.
Yesterday, I was hunting through some references looking for income tax schedules for each state. In a couple publications I found charts that listed things like the top tax rates, but they were entirely inadequate. I found one chart that listed the top tax rate of all the states (the top entries looked a little like this):
State | Top Rate |
Montana | 11.0% |
Vermont | 9.5% |
California | 9.3% |
Oregon | 9.0% |
Iowa | 8.98% |
D.C. | 8.7% |
Maine | 8.5% |
North Carolina | 8.25% |
Hawaii | 8.25% |
New Mexico | 8.2% |
Wow. You would think that Montana and Vermont would have the worst tax burden in the country. However, while the marginal rate is very important, the level at which it applies is equally as important. California's 9.3 rate wouldn't feel nearly as painful at $100,000 than at $38,291. Let's revise the table to include the amount at which the top rate applies above, and move the ranking around a little to have the heavier tax burders on top and lighter ones on the bottom (by my sujective valuation, of course, so don't expect something perfect):
State | Top Rate | Reached At |
Oregon | 9.0% | $6,250 |
California | 9.3% | $38,291 |
Maine | 8.5% | $16,700 |
D.C. | 8.7% | $40,000 |
Hawaii | 8.25% | $40,000 |
New Mexico | 8.2% | $65,000 |
Montana | 11.0% | $75,400 |
Iowa | 8.98% | $54,495 |
North Carolina | 8.25% | $120,000 |
Vermont | 9.5% | $307,050 |
Vermont's tax burden no longer seems as onerous, and California and Oregon's look a lot heavier. Considering Oregon's bottom bracket is 5% at $2,500, it makes you wonder why they even bother with a graduated system at all. (Well, a flat 9% would be the highest flat rate in the country, with Massachusetts next at 5.3%.) Now, I'll fill out the rest of states, but I have a crazy idea. Let's put the unemployment rate next to each state too (in red are those above the national average).
State | Top Rate | Reached At | Unempl. Rate |
Oregon | 9.0% | $6,250 | 7.2% |
California | 9.3% | $38,291 | 6.4% |
Maine | 8.5% | $16,700 | 5.0% |
Utah | 7.0% | $4,313 | 4.7% |
D.C. | 8.7% | $40,000 | 6.6% |
Hawaii | 8.25% | $40,000 | 4.1% |
South Carolina | 7.0% | $12,000 | 6.1% |
New Mexico | 8.2% | $65,000 | 5.7% |
Montana | 11% | $75,400 | 4.5% |
Oklahoma | 7.0% | $10,000 | 5.1% |
Idaho | 7.8% | $21,730 | 4.8% |
Arkansas | 6.5% | $25,000 | 5.5% |
Iowa | 8.98% | $54,495 | 4.4% |
Alabama | 5.0% | $3,000 | 5.8% |
Georgia | 6.0% | $7,000 | 4.1% |
Missouri | 6.0% | $9,000 | 5.0% |
Mississippi | 5.0% | $10,000 | 5.0% |
New York | 6.85% | $20,000 | 6.2% |
Kansas | 6.45% | $30,000 | 4.8% |
Virginia | 5.75 | $17,000 | 3.6% |
Nebraska | 6.84% | $26,500 | 3.7% |
West Virginia | 6.5% | $60,000 | 5.3% |
Minnesota | 7.85% | $61,461 | 4.7% |
Louisiana | 6.0% | $50,000 | 4.8% |
Delaware | 5.95% | $60,000 | 4.1% |
New Jersey | 6.37% | $75,000 | 5.3% |
Kentucky | 6.0% | $80,000 | 5.4% |
Maryland | 4.75% | $3,000 | 4.4% |
Connecticut | 4.5% | $10,000 | 5.0% |
North Carolina | 8.25% | $120,000 | 6.1% |
Ohio | 7.5% | $200,000 | 6.0% |
Vermont | 9.5% | $307,050 | 4.0% |
Wisconsin | 6.75% | $124,200 | 5.2% |
Arizona | 5.04% | $150,000 | 4.8% |
North Dakota | 5.54% | $297,350 | 3.2% |
From Oregon's nation leading 7.2% to North Dakota who is well under the national average at 3.2%, there is a clear trend to lower unemployment with lower income taxe rates. Some outliers, like Montana, allow federal tax decuctibility that can greatly reduce the tax burden.
I left off states that do not use an income tax. They were somewhat random depending on how else the state made up the difference; some where well below the national average (like South Dakota 3.4% and Nevada 4.4%) while others were above it (like Alaska 7.7% and Washington 6.8%). Also left off where the flat tax states. They tended to show the same general progression from generally higher to lower unemployment as the rate fell, except Michigan and Illinois both went against the general trend being hit hard my manufacturing job losses, leaving only four states left and nothing very interesting about it.
Besides taxation, states like California and New York are well known for their heavy regulatory burden and the distortion that has on the business and employment market. In California, this can be partially attributed to tough requirements to raise taxes. While it might hold down taxes (scary to think of them any higher actually), it does so at the expense of increased regulation. For example, instead of passing a new tax to provide further medical care for the population of the state, something that would require a super-majority too difficult to get, the legislature opts to pass laws and regulations that require businesses to provide it instead, since it requires less votes. This is an excellent reason that even if you are conservative econmically, you should still vote YES on Prop 56.
Sources: Here is a good short chart on the top income tax rates, when they kick in, and a couple other small pieces of information. I still cannot find the listing of all the schedules that I have been looking for. Damn. And the state specific unemployment rates are from the BLS.