Comparison of 2006 Individual Income Tax Burdens by State...another NTC member association (see...

Comparison of 2006 Individual Income Tax Burdens by State, Copyright September, 2009 Minnesota Taxpayers Association and other associations of The National Taxpayers Conference This report may not be reproduced in whole or in part without written permission from MTA or another NTC member association (see Acknowledgements for NTC association contacts). For information contact: Minnesota Taxpayers Association 85 East 7th Place, Suite 250 Saint Paul, Minnesota 55101 651-224-7477

Acknowledgements

This report would not have been possible without the cooperation and assistance of many individuals. Special thanks is due to the staff of the Minnesota Department of Revenue’s Research Division, who developed the assumptions used in the study’s examples; to MTA Research Intern Tim Barry for his research and writing support; and our sister taxpayer associations who, along with MTA, are members of the National Taxpayers Conference. We are especially grateful to the National Bureau of Economic Research for their assistance and for the use of the TAXSIM model for calculating the tax liabilities in this report. MTA used version 8.2 in creating this report. NBER’s TAXSIM webpage is http://www.nber.org/~taxsim/. Persons interested in understanding more about the TAXSIM model are encouraged to read “An Introduction to the TAXSIM Model” by Daniel Feenberg and Elisabeth Coutts, which was published in the Journal of Policy Analysis and Management Vol. 12 no. 1 (Winter, 1993); and which is available at http://www.nber.org/~taxsim/feenberg-coutts.pdf.

About the Minnesota Center for Public Finance Research The Minnesota Center for Public Finance Research is the 501c3 supporting research and education organization for the Minnesota Taxpayers Association. The Center’s mission is to provide objective research and analysis on state and local tax and spending issues in support of effective, efficient, and accountable government. The Center seeks to equip citizens to be influential voices for good government and sound fiscal policies by increasing public understanding of what government does. The Center provided substantial funding for this project. For access to this publication on line, visit our website at www.mntax.org/cpfr.

About the Minnesota Taxpayers Association

The Minnesota Taxpayers Association was founded in 1926 for the purpose of disseminating factual information that will educate and inform all Minnesotans about Minnesota tax and spending policies. For over eighty years, the Association has advocated for the adoption of sound fiscal policies through its research efforts, publications, and meetings. The Association is a non-profit, non-partisan group supported by membership dues. For information about membership, call (651) 224-7477, or visit our web site at www.mntax.org.

About the National Taxpayers Conference

The National Taxpayers Conference (NTC) is a private, nonprofit corporation whose members are the full-time chief executive officers of statewide associations devoted to the pursuit of objective and unbiased analysis of public finance issues. Each member association shares a common mission—to provide accurate, unbiased research on state and local taxation and spending policies in their respective states. Some NTC members focus on research; others combine research with active taxpayer advocacy through state and local lobbying. The National Taxpayers Conference is a co-sponsor of this study; the organizations listed on the following page are members of the NTC.

Members of the National Taxpayers Conference

Public Affairs Research Council of Alabama

http://parca.samford.edu/ 205-726-2482

Arizona Tax Research Association

http://www.arizonatax.org/ 602-253-9121

California Taxpayers Association

http://www.caltax.org/ 916-441-0490

Florida Taxwatch, Inc.

http://www.floridataxwatch.org/ 850-222-5052

Associated Taxpayers of Idaho

http://www.ati-taxinfo.com/ 208-344-5581

Taxpayers Federation of Illinois

www.iltaxwatch.org 217-522-6818

Indiana Fiscal Policy Institute

http://www.indianafiscal.org/ 317-566-2143

Iowa Taxpayers Association

www.iowataxpayers.org 515-243-0300

Public Affairs Research Council of

Louisiana http://www.la-par.org/

225-926-8414

Massachusetts Taxpayers Foundation http://www.masstaxpayers.org/

617-720-1000

Citizens Research Council of Michigan http://www.crcmich.org/

734-542-8001

Minnesota Taxpayers Association www.mntax.org 651-224-7477

Montana Taxpayers Association www.montax.org

406-442-2130

Nebraska Tax Research Council http://www.nebraskataxresearch.org/

402-476-2769

New Mexico Tax Research Institute http://www.nmtri.org/

505-842-5833

Nevada Taxpayers Association http://www.nevadataxpayers.org/

702-457-8442

Ohio Public Expenditure Council 614-221-7738

Rhode Island Public Expenditure Council www.ripec.com/ 401-521-6320

Texas Taxpayers and Research Association

www.ttara.org 512-472-8838

Utah Taxpayers Association

www.utahtaxpayers.org 801-972-8814

Washington Research Council www.researchcouncil.org

206-467-7088

Wisconsin Taxpayers Alliance www.wistax.org 608-241-9789

Wyoming Taxpayers Association

www.wyotax.org 307-635-8761

Table of Contents

I. FREQUENTLY ASKED QUESTIONS ......................................................................... 1

II. INTRODUCTION ............................................................................................................ 5

III. ANALYSIS AND FINDINGS.......................................................................................... 7

Measure of Systemic Progressivity .................................................................................... 7 A Note Regarding Earned Income Tax Credits.................................................................. 8 Comparison of Tax Year 2003 and Tax Year 2006 Results............................................. 17

IV. APPENDIX A: METHODOLOGY ............................................................................. 33

V. APPENDIX B: OTHER METHODS OF COMPARING INDIVIDUAL INCOME TAX BURDENS ............................................................................................................. 37

VI. APPENDIX C: FEDERAL INCOME TAX AND PAYROLL TAX LIABILITIES41

VII. APPENDIX D: CHANGES IN TAX RATES AND INCOME BRACKETS FROM 2003 TO 2008 .................................................................................................................. 47

List of Tables

Table 1: Ten Most Progressive State Income Tax Systems, Measured by Comparing Effective Tax Rates at Selected Higher Incomes and $10,000 for Married-Joint Returns..................... 7

Table 2: Ten Most Regressive State Income Tax Systems, Measured by Comparing Effective Tax Rates at Selected Higher Incomes and $10,000 for Married-Joint Returns............................ 8

Table 3: Ten Most Progressive State Income Tax Systems, Measured by Comparing Effective Tax Rates at Selected Higher Incomes and $35,000 for Married-Joint Returns..................... 9

Table 3: Tax Year 2006 Income Tax Burdens for Married-Joint Filers*...................................... 10 Table 4: Tax Year 2006 Income Tax Burdens for Head of Household Filers*............................. 12 Table 5: Tax Year 2006 Income Tax Burdens for Single Filers*.................................................. 14 Table 6: Tax Year 2006 Income Tax Burdens for Married-Joint Senior Filers* .......................... 16 Table 7: Comparison of Tax Year 2003 and Tax Year 2006 Rank and Net Tax, by State, Filing

Status, and Gross Income...................................................................................................... 18 Table 8: Fiscal Year 2006 State and Local Income Tax Collections per Capita ........................... 37 Table 9: Fiscal Year 2006 State and Local Income Tax Collections per $1,000 of Personal Income

.............................................................................................................................................. 38 Table 10: Personal Income Tax as a Share of Family Income, 2002 ............................................ 39 Table 11: Tax Year 2006 Federal Income Tax Burdens for Married-Joint Filers*....................... 42 Table 12: Tax Year 2006 Federal Income Tax Burdens for Single Filers*................................... 44 Table 13: Tax Year 2006 Federal Income Tax Burdens for Head of Household Filers*.............. 45 Table 14: Tax Year 2006 Federal Income Tax Burdens for Senior Filers* ................................. 46 Table 15: Tax Year 2006 Payroll Tax Burdens by Filing Type and Gross Income ..................... 46 Table 16: Tax Year 2003, 2006, and 2008 Tax Rates and Income Brackets, Individual Income

Tax, Married-Joint Filers, Various States ............................................................................. 47

Tax Year 2006 Individual Income Tax Burdens National Taxpayers Conference

1

I. Frequently Asked Questions

What’s in this publication?

This Comparison of 2006 Individual Income Tax Burdens by State calculates the net income taxes paid for the following filer types:

Single (at 8 different income levels) Married-filing-joint1 (at 10 different income levels) Head of household2 (at 6 different income levels) Senior3 (at 4 different income levels)

The study also provides additional analysis and commentary.

Since this is 2009, why are you reporting on tax year 2006? Data from state and federal government sources often have a time lag of two or more years since the data must be collected and verified and inaccurate records corrected or eliminated. Since the most recent available data regarding the amounts of deductions taken by filers at various income levels is for tax year 2006, this study analyzes that tax year.

How is this study different from other reports which examine and rank state income tax burdens?

There are three ways to examine relative income tax burdens:

1. Compare individual tax burdens across states at various gross income levels. This method looks at the actual taxes paid by hypothetical families using reasonable assumptions about sources of income, deductions, and credits taken. This is the approach used in this study.

2. Compare aggregate state income tax collections on either a per capita or per income basis. This method simply sums up all the state income tax collections and divides it by total state population or total state income.

3. Compare distribution of the tax burden across income classes. This method examines who actually pays the income tax by calculating shares of income taxes paid by different ranges or classes of income. One method of presenting this information shows how much of the total tax burden is paid by the top 5% of filers, the top 10% of filers, the top 25% of filers, and so forth. Another method divides the population into group of equal size, on an income or population basis, and then shows the effective tax rate (total tax divided by total income) for each group.

Each approach offers an important and different perspective on state income taxation. This study is unique in that it provides a “real feel” dimension to state income tax comparisons by modeling actual tax returns for different types of households.

1 Defined as households with two wage earners and two dependents. 2 Defined to include households with one dependent. 3 Defined as households with persons age 65 or older submitting married-filing-joint returns. The other three filing types represent non-senior households.

Frequently Asked Questions

2

For reference purposes Appendix B provides the most recently available information on the other two approaches to comparing state income taxes.

Does this study include income tax calculations for every state?

This study covers income tax burdens in 41 states and the District of Columbia. The nine remaining states either have no state income tax, or a tax that is so limited that it is not worth including in this analysis. Those states are: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Does this study include local income taxes? This study covers local income tax burdens in states where more than half of the population live in jurisdictions where a local income tax is imposed. For 2006, four states met that standard: Indiana, Maryland, Ohio, and Pennsylvania. The tax rate used was that imposed on the largest segment of the population. See the methodology section for more information on how the local income tax burden is calculated.

How do you calculate the tax burdens? In earlier versions of this study, we calculated the tax liability for each permutation of state, filing status, and income either by hand or through the use of tax return software. For this study, we are using an alternative to this labor-intensive process: the National Bureau of Economic Research’s TAXSIM; a FORTRAN program for calculating liabilities under federal and state income tax laws from individual data.4

But individual income tax returns will differ significantly from household to household even among the same filer types. How do you determine the assumptions to calculate the income tax burdens?

The Minnesota Department of Revenue’s Research Division provided data on taxpayer income (wages, interest earnings, capital gains, etc.) and deductions for the four filer types at all the income levels included in this study. The data comes from the entire population of Minnesota filers for the 2006 tax year. Then, to ensure the tax calculations and rankings reflect actual conditions in other states, we adjusted all income tax deductions (except for the state income tax deduction, which TAXSIM calculates automatically) using state-specific data from the Statistics of Income Bulletin from the Internal Revenue Service for Spring, 2008 (which corresponds with tax year 2006). See our Methodology section for more information on how these adjustments take place.

These state adjustments are crucial since deductions will vary considerably from state to state. For example, a Minnesota married-joint filer with gross income of $75,000 has a median real property tax deduction of $2,104. However, we know that the value of this deduction will be different in other states due to differences in median home values and effective property tax rates.

4 Version 8.2 was used to create this report. NBER’s TAXSIM webpage is http://www.nber.org/~taxsim/. Readers interested in understanding more about the TAXSIM model are encouraged to examine “An Introduction to the TAXSIM Model” by Daniel Feenberg and Elisabeth Coutts, which was published in the Journal of Policy Analysis and Management Vol. 12 no. 1 (Winter, 1993); and which is available at http://www.nber.org/~taxsim/feenberg-coutts.pdf.


3

So, this report compares individual income tax burdens between different states. What else does it do?

The study also provides: Data on the most progressive and most regressive income tax systems A comparison of the study’s results with the results from our tax year 2003 study

(published December 2004) Federal income and FICA tax burdens for each filer type and income level in each state

(Appendix C) Changes to state income tax rates and brackets since tax year 2006 (Appendix D)

I notice that in many cases, tax burdens have declined from the 2003 version of this study. Does this mean that taxes have really gone down?

Not necessarily, because over time a constant amount of income will generally yield a smaller amount of tax revenue, unless there is some change to the tax code. Some (but not all) states index their tax brackets to some form of inflation (usually the Consumer Price Index). States do this to prevent “bracket creep”, where inflationary pressures move households into higher tax brackets, resulting in larger tax payments even though the household is economically no better off. Other states indirectly adjust income by incorporating the federal standard deduction and personal exemption (which are also indexed annually for inflation) into their calculation of taxable income. Clearly, changes in the amount of reported itemized deductions also play a role in changing net tax burdens from study to study. In 2006, itemized deductions have generally risen for all income levels – this also pushes net tax burdens down. Some changes in net tax are related to changes to personal income tax rates, exemptions, or other items. The message is this: to completely interpret the changes in net tax for your state, check to see whether your legislature and governor modified the individual income tax regime between 2003 and 2006.

All right, so you have to be careful when comparing net tax burdens from one year to another. Are there any other cautions in interpreting this study?

It’s also important to recognize that income taxes are just one piece of the combined state and local tax system. Some states have lower income taxes because their local governments are more “own-source” revenue dependent. Certain states place more responsibility for public service delivery with local government which often translates into relatively lower income tax burdens. As a result, the study is most useful when used in connection with other information about state and local tax structures.

Are there any items that are not included in this study?

We exclude property tax refunds or credits that are included on an income tax return from the analysis in this study to create consistent treatment of all states. Some states have property tax rebate or credit provisions as part of the income tax return but most offer property tax rebates that must be filed for separately from the income tax return. We were not able to model these separate property tax rebate programs and include them in the analysis. Including some property tax rebate programs but excluding others would create an “apples-to-oranges” comparison between states.

Frequently Asked Questions

4

This Page Intentionally Blank


5

II. Introduction This study provides a comparison of individual income tax burdens in 41 states and the District of Columbia. It is a complete revision of our burden studies for tax years 1997, 1999, and 2003. The assumptions used in this study were developed by the Minnesota Department of Revenue’s Research Division using aggregate data from actual 2006 tax returns. The assumptions for each filer types were adjusted on a state-by-state basis to more accurately determine the actual tax paid in each state. See our Frequently Asked Questions and Methodology sections for more information on these adjustments. This report uses the National Bureau of Economic Research’s TAXSIM Version 8.2 income tax simulator (available at http://www.nber.org/~taxsim/taxsim-calc8/) to calculate the tax liability for four different filer types at four to ten different income levels in each of the participating jurisdictions. Persons interested in understanding more about the TAXSIM model are encouraged to read “An Introduction to the TAXSIM Model” by Daniel Feenberg and Elisabeth Coutts, which was published in the Journal of Policy Analysis and Management Vol. 12 no. 1 (Winter, 1993); and which is available at http://www.nber.org/~taxsim/feenberg-coutts.pdf.

Why Do Rankings Matter? In today’s world of increased mobility and competition for economic development, states are increasingly watching each other. They must balance the need to provide the high-quality public services and infrastructure improvements needed to encourage economic growth with the need to be fiscally competitive. States that fail to provide adequate services and public investments are likely to lose ground to those that do. On the other hand, if they don’t control costs and let their tax burdens rise too far above those of other states, they could loose their competitive edge and fail to attract the kind of jobs and workers needed for long-term prosperity. The tax rankings provided in this report combined with other tax and spending measures can help policy makers assess the state’s competitive position.

The rankings provided in this report also give us information about how state income tax systems treat taxpayers at different income levels, that is, the progressivity or “vertical equity” of state income taxes.

Introduction

6



7

III. Analysis and Findings

The findings of this study are reported in three main areas: First, we provide a measure of structural progressivity; showing the ten most

progressive and least regressive income tax systems (Tables 1-2). Second, we report the individual income tax burdens and rankings for all filer types

and income levels for tax year 2006 (Tables 3-6). Finally, we report state-specific changes from tax year 2003 to tax year 2006 (Table

7). We provide data on federal income and payroll tax liabilities in Appendix C.

Measure of Structural Progressivity One principle commonly used when evaluating tax systems or tax proposals is “progressivity” or “fairness” (i.e. taxation based on an ability to pay). Income taxes are generally among the most “progressive” taxes; and therefore the tax burden increases with increased income. Progressivity is achieved mainly through the use of differential income rates at various income levels with tax rates rising as income levels rise. The following table shows the relationship between the effective tax rate at $150,000 of gross income and higher versus that at $10,000 of gross income; for married-joint filers. A higher rate gap indicates greater progressivity.

Table 1: Ten Most Progressive State Income Tax Systems, Measured by Comparing Effective Tax Rates at Selected Higher Incomes and $10,000 for Married-Joint Returns

Married Filing Joint Returns $150,000 vs. $10,000 $250,000 vs. $10,000 $500,000 vs. $10,000 $1,000,000 vs. $10,000

Most Progressive Income Tax

States

Tax Rate Gap*


States

Tax Rate Gap*


States

Tax Rate Gap*


States

Tax Rate Gap*

1. D.C. 19.7% 1. D.C. 20.2% 1. Vermont 21.4% 1. Vermont 22.0% 2. New York 19.3% 2. New York 20.1% 2. D.C. 21.0% 2. D.C. 21.4% 3. Vermont 18.6% 3. Vermont 20.0% 3. New York 20.4% 3. New York 20.7% 4. Minnesota 14.8% 4. Minnesota 15.5% 4. Minnesota 16.4% 4. Minnesota 16.9% 5. Kansas 13.8% 5. Kansas 14.3% 5. Kansas 14.8% 5. Kansas 15.1% 6. Maryland 11.6% 6. New Jersey 12.6% 6. New Jersey 13.5% 6. New Jersey 14.6% 7. New Jersey 11.4% 7. Maryland 12.0% 7. Maryland 12.3% 7. Maryland 12.5% 8. Wisconsin 10.9% 8. Wisconsin 11.3% 8. Wisconsin 11.8% 8. Wisconsin 12.0% 9. Massachusetts 10.6% 9. Massachusetts 10.9% 9. Massachusetts 11.1% 9. Massachusetts 11.2% 10. Michigan 9.5% 10. Michigan 9.7% 10. Oregon 10.2% 10. Oregon 10.5% * “Tax Rate Gap” refers to the difference between the state’s effective tax rate (ETR) at $10,000 versus the ETR at the higher income examples shown. For example, New York’s ETR for married-filing-joint returns at $10,000 is -14.0%, and at $150,000 it is 5.3%. The gap of 19.3% is calculated as $150,000 ETR (5.3%) minus $10,000 ETR (-14.0%).

Table 2 shows the same relationship, but displays instead the ten most regressive (or least progressive) states.

Analysis and Findings

8

Table 2: Ten Most Regressive State Income Tax Systems, Measured by Comparing Effective Tax Rates at Selected Higher Incomes and $10,000 for Married-Joint Returns


Most Regressive Income Tax

States

Tax Rate Gap*


States

Tax Rate Gap*


States

Tax Rate Gap*


States

Tax Rate Gap*

42. Alabama 1.6% 42. Alabama 1.6% 42. Alabama 1.6% 42. Alabama 1.6% 41. Illinois 2.4% 41. Pennsylvania 3.1% 41. Pennsylvania 3.1% 41. Pennsylvania 3.1% 40. Pennsylvania 3.1% 40. Illinois 3.2% 40. Louisiana 4.1% 40. Louisiana 4.1% 39. Mississippi 3.6% 39. Mississippi 3.9% 39. Illinois 4.2% 39. Colorado 4.3% 38. Connecticut 3.6% 38. North Dakota 4.0% 38. Colorado 4.3% 38. North Dakota 4.5% 37. North Dakota 3.6% 37. Louisiana 4.1% 37. Mississippi 4.3% 37. Mississippi 4.5% 36. Missouri 3.7% 36. Colorado 4.2% 36. North Dakota 4.3% 36. Illinois 4.7% 35. Louisiana 4.0% 35. Connecticut 4.2% 35. Indiana 4.7% 35. Indiana 4.8% 34. Colorado 4.0% 34. Missouri 4.4% 34. Connecticut 4.8% 34. Arizona 5.0% 33. Virginia 4.1% 33. Virginia 4.6% 33. Arizona 4.9% 33. Connecticut 5.2% * “Tax Rate Gap” refers to the difference between the state’s effective tax rate (ETR) at $10,000 versus the ETR at the higher income examples shown. For example, Pennsylvania’s ETR for married-filing-joint returns at $10,000 is 0.0%, and at $150,000 it is 3.1%. The gap of 3.1% is calculated as $150,000 ETR (3.1%) minus $10,000 ETR (0.0%).

The Influence of State Earned Income Tax Credits on Structural Progressivity In tax year 2006, 20 of the 42 states in this study5 offered a state earned income tax credit, which is a tax reduction and a wage supplement for low income working families. In most cases these state credits are refundable, meaning filers receive the value of the tax credit whether or not the filer owes any income tax – often creating negative income tax rates for low-income filers. The negative tax rates that result from the use of the state income tax as an income assistance program significantly influence the structural progressivity of state income taxes as measured by tax rate gaps. The impact can be illustrated by California, which has one of the most progressive income tax structures in the nation based on statutory tax rates. As Table 8 in this report shows, married couples in California earning $35,000 to $100,000 per year rank at or near the bottom in income tax burden, but married couples in that state earning $250,000 or more are in the top ten nationally. However, since California does not offer a state earned income tax credit, the tax rate gap between highest and lowest earning households is not as great as in other states which do provide this credit. Our progressivity rankings would look very different if the base were $35,000 of gross income – the point at which state earned income tax credits have generally been phased out (see Table 3). While certain states from Table 1 are also included in Table 3, some states without earned income tax credits emerge as highly progressive, including California.

5 Delaware, District of Columbia, Indiana, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, New Jersey, New York, Oklahoma, Oregon, Rhode Island, Vermont, Virginia, and Wisconsin.


9

Table 3: Ten Most Progressive State Income Tax Systems, Measured by Comparing Effective Tax Rates at Selected Higher Incomes and $35,000 for Married-Joint Returns



States

Tax Rate Gap*


States

Tax Rate Gap*


States

Tax Rate Gap*


States

Tax Rate Gap*

1. New York 5.8% 1. New York 6.6% 1. California 8.1% 1. California 8.9% 2. Maine 4.9% 2. California 6.3% 2. New York 6.8% 2. New York 7.2% 3. Idaho 4.6% 3. Maine 5.8% 3. Maine 6.5% 3. Vermont 7.1% 4. California 4.2% 4. Idaho 5.4% 4. Vermont 6.5% 4. Maine 7.0% 5. South Carolina 4.1% 5. Vermont 5.1% 5. Idaho 6.1% 5. Idaho 6.4% 6. Minnesota 4.0% 6. Nebraska 4.8% 6. Rhode Island 5.6% 6. Minnesota 6.2% 7. Connecticut 3.9% 7. Minnesota 4.7% 7. Minnesota 5.6% 7. Rhode Island 5.9% 8. North Carolina 3.9% 8. South Carolina 4.7% 8. South Carolina 5.4% 8. South Carolina 5.6% 9. Nebraska 3.7% 9. Rhode Island 4.4% 9. Nebraska 5.3% 9. Nebraska 5.5% 10. Vermont 3.7% 10. North Carolina 4.3% 10. North Carolina 4.8% 10. New Jersey 5.3% * “Tax Rate Gap” refers to the difference between the state’s effective tax rate (ETR) at $35,000 versus the ETR at the higher income examples shown. For example, Maine’s ETR for married-filing-joint returns at $35,000 is 1.2%, and at $150,000 it is 6.1%. The gap of 4.9% is calculated as $150,000 ETR (6.1%) minus $35,000 ETR (1.2%).


10

State Income Tax Comparison Tables, Tax Year 2006 Liabilities

Table 4: Tax Year 2006 Income Tax Burdens for Married-Joint Filers* $10,000 $20,000 $35,000 $50,000 $75,000 STATE Tax Rank Tax Rank Tax Rank Tax Rank Tax Rank Alabama $156 2 $540 1 $1,290 6 $1,396 15 $2,454 29 Arizona (100) 25 (100) 32 426 29 622 40 1,439 39 Arkansas - 5 287 6 905 15 1,292 18 2,951 17 California - 5 - 19 - 41 - 42 870 42 Colorado - 5 - 19 532 26 1,000 30 2,252 33 Connecticut - 5 - 19 215 38 850 33 3,015 15 Delaware - 5 - 19 364 34 876 32 2,298 31 District of Columbia (1,329) 40 (800) 39 1,355 3 1,649 8 3,833 2 Georgia (32) 22 134 12 976 12 1,146 27 2,678 23 Hawaii (49) 23 507 3 1,468 2 1,293 17 3,184 12 Idaho (70) 24 (70) 31 397 32 1,259 22 3,277 9 Illinois (140) 27 166 11 774 18 1,260 21 2,010 36 Indiana (107) 26 340 5 1,189 8 1,832 3 2,932 18 Iowa - 5 85 15 1,080 9 1,482 13 3,009 16 Kansas (899) 38 (554) 37 593 25 1,012 29 2,666 25 Kentucky - 5 - 19 1,353 4 1,815 4 3,357 7 Louisiana - 5 180 9 680 21 1,269 19 2,497 28 Maine - 5 - 19 411 31 1,149 26 3,294 8 Maryland (798) 36 (533) 35 957 13 1,480 14 3,791 3 Massachusetts (599) 34 (574) 38 640 23 1,542 9 2,867 20 Michigan (602) 35 177 10 803 17 1,388 16 2,363 30 Minnesota (998) 39 (1,552) 41 277 36 1,241 23 2,906 19 Mississippi - 5 12 18 519 27 731 37 2,035 35 Missouri - 5 54 16 667 22 1,092 28 2,275 32 Montana - 5 130 13 694 20 1,154 25 2,698 22 Nebraska (319) 31 (310) 34 422 30 987 31 2,619 26 New Jersey (798) 36 210 8 455 28 718 38 1,295 40 New Mexico (145) 28 (50) 29 99 40 704 39 2,054 34 New York (1,397) 41 (1,661) 42 (144) 42 798 36 2,519 27 North Carolina - 5 40 17 940 14 1,499 12 3,375 6 North Dakota - 5 - 19 242 37 489 41 1,048 41 Ohio 200 1 513 2 1,305 5 2,151 2 3,791 4 Oklahoma (340) 32 (59) 30 997 10 1,514 10 3,088 13 Oregon (200) 30 251 7 1,759 1 2,174 1 4,261 1 Pennsylvania 50 4 100 14 1,250 7 1,785 5 2,677 24 Rhode Island (150) 29 (145) 33 317 35 808 35 1,793 37 South Carolina - 5 - 19 365 33 1,209 24 3,021 14 Utah - 5 - 19 745 19 1,503 11 3,231 10 Vermont (1,439) 42 (1,239) 40 186 39 827 34 1,762 38 Virginia 0 5 - 19 867 16 1,265 20 2,802 21 West Virginia 60 3 380 4 990 11 1,695 7 3,230 11 Wisconsin (559) 33 (542) 36 622 24 1,736 6 3,479 5 42 State Average $ (262) $ (113) $ 700 $ 1,227 $ 2,696*2 wage earners, 2 dependents


11

Table 4 (contd): Tax Year 2006 Income Tax Burdens for Married-Joint Filers* $100,000 $150,000 $250,000 $500,000 $1,000,000 STATE Tax Rank Tax Rank Tax Rank Tax Rank Tax Rank Alabama $3,264 32 $4,737 39 $7,822 39 $15,450 41 $31,333 41 Arizona 2,172 40 3,813 41 7,788 41 18,481 39 41,213 37 Arkansas 4,454 15 7,659 14 14,256 15 31,278 17 66,174 14 California 2,403 39 6,261 26 15,553 9 39,999 2 87,992 1 Colorado 3,297 31 5,376 33 9,805 35 21,339 34 44,385 34 Connecticut 4,508 13 7,100 19 12,100 27 24,600 30 49,600 31 Delaware 3,573 27 6,210 28 11,705 29 26,187 25 55,999 24 District of Columbia 5,666 3 9,494 4 16,976 5 37,388 5 79,725 5 Georgia 3,908 25 6,450 25 11,728 28 25,414 28 53,571 28 Hawaii 4,830 10 8,251 8 15,587 8 34,043 11 71,846 11 Idaho 4,995 8 8,525 7 16,071 7 35,439 7 73,866 8 Illinois 2,760 37 4,260 40 7,260 42 14,760 42 29,760 42 Indiana 4,005 23 6,182 29 10,582 32 21,582 33 43,582 36 Iowa 4,400 17 7,061 21 12,914 21 27,386 22 57,086 22 Kansas 4,117 22 7,065 20 13,030 20 28,332 20 59,602 21 Kentucky 4,652 11 7,351 15 12,914 22 27,296 23 56,842 23 Louisiana 3,762 26 5,995 30 10,407 34 20,708 35 40,926 38 Maine 5,195 6 9,054 5 17,157 4 37,795 4 80,108 4 Maryland 5,500 5 8,904 6 16,386 6 35,002 8 73,131 10 Massachusetts 4,192 20 6,838 23 12,132 26 25,382 29 51,882 29 Michigan 3,338 30 5,288 35 9,188 37 18,938 38 38,438 39 Minnesota 4,411 16 7,695 12 15,140 11 34,632 9 73,743 9 Mississippi 3,077 36 5,243 36 9,442 36 20,612 36 43,976 35 Missouri 3,208 33 5,536 31 10,687 31 24,208 31 51,867 30 Montana 3,975 24 7,015 22 13,620 18 30,408 19 64,751 18 Nebraska 4,145 21 7,249 17 14,656 12 32,070 14 65,486 16 New Jersey 2,474 38 5,236 37 11,564 30 27,489 21 65,350 17 New Mexico 3,202 34 5,496 32 10,451 33 23,009 32 47,978 32 New York 3,456 29 7,876 11 15,354 10 31,955 15 66,981 12 North Carolina 6,341 1 9,809 2 17,256 3 36,989 6 78,141 6 North Dakota 1,803 42 3,492 42 7,807 40 20,312 37 46,329 33 Ohio 5,642 4 9,594 3 17,836 2 39,911 3 83,919 3 Oklahoma 4,398 18 7,105 18 12,321 24 26,097 26 54,432 26 Oregon 6,176 2 10,214 1 18,720 1 40,238 1 84,176 2 Pennsylvania 3,570 28 5,354 34 8,919 38 17,819 40 35,583 40 Rhode Island 1,920 41 5,027 38 13,051 19 32,327 13 66,831 13 South Carolina 4,503 14 7,678 13 14,255 16 31,493 16 65,657 15 Utah 4,605 12 7,298 16 12,779 23 26,941 24 55,980 25 Vermont 3,194 35 6,210 27 13,767 17 34,377 10 75,279 7 Virginia 4,194 19 6,773 24 12,195 25 26,055 27 54,295 27 West Virginia 4,855 9 8,105 9 14,605 13 30,855 18 63,355 20 Wisconsin 5,078 7 7,914 10 14,486 14 33,464 12 63,670 19 42 State Average $ 4,048 $ 6,904 $ 12,987 $ 28,600 $ 60,085*2 wage earners, 2 dependents


12

Table 5: Tax Year 2006 Income Tax Burdens for Head of Household Filers* $10,000 $20,000 $35,000 $50,000 STATE Tax Rank Tax Rank Tax Rank Tax Rank Alabama $195 2 $695 5 $1,366 13 $1,545 32 Arizona (75) 27 62 29 546 37 959 39 Arkansas - 10 510 10 1,439 10 2,123 13 California - 10 - 33 55 42 382 42 Colorado - 10 271 19 965 30 1,625 31 Connecticut - 10 8 32 360 41 1,692 28 Delaware - 10 - 33 1,156 21 1,742 27 District of Columbia (826) 40 (11) 36 1,710 4 2,257 8 Georgia 14 9 460 12 1,360 14 1,803 24 Hawaii 101 5 739 2 1,776 3 2,126 12 Idaho (30) 26 139 26 1,109 23 2,210 9 Illinois 43 7 384 14 930 32 1,380 34 Indiana 121 4 611 7 1,386 11 2,018 16 Iowa - 10 339 17 1,379 12 2,091 15 Kansas (637) 38 (92) 39 1,072 26 1,866 22 Kentucky - 10 822 1 1,692 5 2,310 6 Louisiana - 10 345 16 1,030 28 1,833 23 Maine - 10 39 31 1,010 29 2,263 7 Maryland (491) 35 - 33 2,030 2 2,666 2 Massachusetts (412) 34 133 27 1,190 19 1,985 18 Michigan (492) 36 499 11 1,084 24 1,669 29 Minnesota (687) 39 (373) 40 1,115 22 2,098 14 Mississippi - 10 234 23 955 31 1,361 35 Missouri - 10 248 20 1,045 27 1,537 33 Montana 31 8 390 13 1,196 18 1,962 19 Nebraska (220) 33 41 30 768 35 1,664 30 New Jersey (549) 37 245 22 499 38 761 40 New Mexico (95) 29 (16) 37 487 39 1,316 36 New York (931) 41 (565) 42 779 34 1,744 26 North Carolina - 10 536 9 1,522 8 2,365 5 North Dakota - 10 123 28 438 40 736 41 Ohio 200 1 673 6 1,566 7 2,528 4 Oklahoma (177) 32 219 24 1,238 16 1,891 21 Oregon (76) 28 732 3 2,034 1 2,792 1 Pennsylvania 50 6 714 4 1,250 15 1,785 25 Rhode Island (103) 30 (39) 38 782 33 1,289 37 South Carolina - 10 168 25 1,084 25 2,134 11 Utah - 10 274 18 1,227 17 2,162 10 Vermont (1,041) 42 (403) 41 751 36 1,265 38 Virginia - 10 246 21 1,479 9 2,010 17 West Virginia 180 3 540 8 1,170 20 1,935 20 Wisconsin (110) 31 362 15 1,604 6 2,628 3 42 State Average $ (143) $ 245 $ 1,134 $1,822 * 1 dependent


13

Table 5 (contd): Tax Year 2006 Income Tax Burdens for Head of Household Filers* $75,000 $100,000 STATE Tax Rank Tax Rank Alabama $2,264 36 $3,009 37 Arizona 1,541 39 2,302 41 Arkansas 3,585 9 5,219 9 California 1,553 38 3,548 34 Colorado 2,551 31 3,581 32 Connecticut 3,156 21 4,680 20 Delaware 2,877 28 4,257 25 District of Columbia 3,915 6 5,752 5 Georgia 2,942 27 4,202 26 Hawaii 3,533 13 5,210 10 Idaho 3,760 8 5,510 8 Illinois 2,130 37 2,880 38 Indiana 3,089 25 4,166 28 Iowa 3,434 15 4,898 14 Kansas 3,221 19 4,711 17 Kentucky 3,538 12 4,876 16 Louisiana 3,087 26 4,172 27 Maine 4,064 5 5,966 3 Maryland 4,208 3 5,928 4 Massachusetts 3,310 17 4,635 21 Michigan 2,644 30 3,619 31 Minnesota 3,550 11 5,119 12 Mississippi 2,313 35 3,442 36 Missouri 2,529 32 3,811 30 Montana 3,300 18 4,881 15 Nebraska 3,134 23 4,688 19 New Jersey 1,383 42 2,612 40 New Mexico 2,342 34 3,508 35 New York 3,174 20 4,595 22 North Carolina 3,800 7 5,750 6 North Dakota 1,429 41 2,225 42 Ohio 4,219 2 6,026 2 Oklahoma 3,111 24 4,481 24 Oregon 4,467 1 6,461 1 Pennsylvania 2,677 29 3,570 33 Rhode Island 1,539 40 2,693 39 South Carolina 3,574 10 5,138 11 Utah 3,364 16 4,699 18 Vermont 2,464 33 3,968 29 Virginia 3,150 22 4,552 23 West Virginia 3,490 14 5,115 13 Wisconsin 4,155 4 5,699 7 42 State Average $ 3,037 $ 4,432* 1 dependent


14

Table 6: Tax Year 2006 Income Tax Burdens for Single Filers* $10,000 $20,000 $35,000 $50,000 $75,000 STATE Tax Rank Tax Rank Tax Rank Tax Rank Tax Rank Alabama $277 5 $717 11 $1,355 24 $1,536 36 $2,361 38 Arizona 75 21 384 36 859 40 1,219 39 2,084 40 Arkansas 70 23 554 22 1,483 21 2,193 17 3,904 13 California - 37 193 40 929 39 1,515 37 3,358 26 Colorado 72 22 535 24 1,229 30 1,831 29 2,837 32 Connecticut - 37 144 41 1,277 25 2,070 23 3,550 22 Delaware - 37 475 29 1,266 26 1,906 27 3,165 29 District of Columbia 213 10 870 5 1,920 5 2,535 8 4,488 5 Georgia 125 17 710 13 1,610 13 2,077 22 3,383 24 Hawaii 256 7 944 3 2,035 3 2,507 9 4,125 9 Idaho 24 35 639 18 1,763 6 2,793 4 4,592 4 Illinois 232 9 540 23 990 37 1,440 38 2,190 39 Indiana 386 1 836 7 1,496 18 2,122 19 3,198 27 Iowa 168 13 656 16 1,485 20 2,022 26 3,435 23 Kansas 142 15 516 26 1,447 23 2,186 18 3,702 16 Kentucky 26 34 842 6 1,712 8 2,363 14 3,719 15 Louisiana 107 20 (406) 42 1,054 35 1,850 28 2,958 30 Maine 32 32 499 27 1,680 9 2,869 3 4,810 2 Maryland 296 4 1,188 1 2,380 1 2,988 2 4,665 3 Massachusetts 176 12 776 9 1,545 15 2,340 15 3,665 18 Michigan (340) 42 651 17 1,236 29 1,821 30 2,796 34 Minnesota 42 28 618 20 1,523 17 2,479 10 4,050 11 Mississippi 51 27 435 32 1,185 32 1,540 35 2,740 35 Missouri 54 25 459 30 1,224 31 1,645 34 2,848 31 Montana 114 19 527 25 1,560 14 2,040 25 3,650 20 Nebraska 31 33 401 35 1,177 33 2,104 21 3,699 17 New Jersey 126 16 266 37 525 42 1,215 40 2,596 37 New Mexico (65) 40 205 39 1,062 34 1,672 33 2,832 33 New York 51 26 489 28 1,487 19 2,436 12 3,971 12 North Carolina 270 6 888 4 1,938 4 2,725 5 4,420 6 North Dakota 33 31 243 38 558 41 950 42 1,842 41 Ohio 200 11 740 10 1,644 11 2,615 7 4,305 8 Oklahoma 124 18 784 8 1,721 7 2,231 16 3,659 19 Oregon 369 2 1,169 2 2,317 2 3,090 1 5,077 1 Pennsylvania 357 3 714 12 1,250 28 1,785 31 2,677 36 Rhode Island 17 36 433 33 996 36 1,149 41 1,224 42 South Carolina 38 30 446 31 1,483 22 2,413 13 4,055 10 Utah 69 24 673 15 1,641 12 2,450 11 3,853 14 Vermont (158) 41 416 34 956 38 1,681 32 3,177 28 Virginia 142 14 675 14 1,531 16 2,119 20 3,376 25 West Virginia 240 8 620 19 1,260 27 2,055 24 3,620 21 Wisconsin 39 29 585 21 1,655 10 2,714 6 4,312 7 42 State Average $107 $573 $1,415 $2,078 $3,452 * No dependents


15

Table 6 (contd): Tax Year 2006 Income Tax Burdens for Single Filers* $100,000 $150,000 $250,000 STATE Tax Rank Tax Rank Tax Rank Alabama $3,097 38 $4,750 40 $7,956 41 Arizona 3,022 39 4,938 39 9,306 39 Arkansas 5,451 14 8,640 14 15,562 14 California 5,540 12 9,633 8 19,761 2 Colorado 3,910 34 6,010 35 10,607 35 Connecticut 4,800 26 7,300 27 12,300 30 Delaware 4,562 28 7,283 28 13,086 26 District of Columbia 6,398 4 10,280 3 18,243 5 Georgia 4,635 27 7,186 29 12,728 29 Hawaii 5,902 8 9,386 10 16,932 10 Idaho 6,331 5 9,864 6 17,701 7 Illinois 2,940 40 4,440 42 7,440 42 Indiana 4,290 29 6,464 32 10,858 33 Iowa 4,955 22 8,005 20 14,157 21 Kansas 5,179 18 8,136 19 14,346 20 Kentucky 5,059 20 7,818 22 13,655 24 Louisiana 4,140 31 6,435 33 10,612 34 Maine 6,767 2 10,671 2 19,072 3 Maryland 6,425 3 9,877 5 17,593 8 Massachusetts 4,989 21 7,635 23 12,935 28 Michigan 3,771 35 5,721 37 9,621 37 Minnesota 5,814 10 9,395 9 17,250 9 Mississippi 3,746 36 5,858 36 10,404 36 Missouri 4,123 32 6,714 30 12,148 31 Montana 5,223 17 8,377 18 15,227 17 Nebraska 5,254 15 8,378 17 15,500 16 New Jersey 4,180 30 7,365 26 13,735 22 New Mexico 3,986 33 6,280 34 11,352 32 New York 5,495 13 9,269 11 16,148 12 North Carolina 6,144 6 9,727 7 17,976 6 North Dakota 2,653 42 4,490 41 9,359 38 Ohio 6,121 7 10,261 4 18,813 4 Oklahoma 4,954 23 7,629 24 13,189 25 Oregon 7,142 1 11,232 1 20,011 1 Pennsylvania 3,570 37 5,352 38 8,914 40 Rhode Island 2,883 41 6,490 31 15,078 18 South Carolina 5,591 11 8,761 13 15,660 13 Utah 5,159 19 7,840 21 13,664 23 Vermont 4,826 24 8,411 16 16,613 11 Virginia 4,823 25 7,499 25 13,008 27 West Virginia 5,245 16 8,495 15 14,995 19 Wisconsin 5,864 9 8,991 12 15,512 15 42 State Average $4,880 $7,793 $14,024 * No dependents


16

Table 7: Tax Year 2006 Income Tax Burdens for Married-Joint Senior Filers* $10,000 $20,000 $35,000 $50,000 STATE Tax Rank Tax Rank Tax Rank Tax Rank Alabama $180 2 $565 4 $1,004 6 $1,327 12 Arizona (50) 39 35 26 367 23 611 27 Arkansas (40) 36 93 21 372 22 751 23 California - 6 - 30 - 35 165 35 Colorado - 6 - 30 - 35 118 37 Connecticut - 6 - 30 57 33 293 32 Delaware - 6 - 30 - 35 - 40 District of Columbia - 6 405 7 1,104 5 1,713 3 Georgia (48) 38 - 30 - 35 51 39 Hawaii (47) 37 333 9 428 19 588 28 Idaho (60) 40 (42) 42 402 20 1,026 18 Illinois 54 4 335 8 387 21 463 30 Indiana 220 1 660 1 1,115 3 1,542 7 Iowa - 6 187 14 260 29 742 24 Kansas (150) 42 210 13 809 9 1,556 6 Kentucky - 6 - 30 - 35 121 36 Louisiana - 6 121 17 125 31 243 34 Maine - 6 114 18 493 18 1,047 17 Maryland - 6 438 6 575 15 775 21 Massachusetts - 6 295 11 1,126 2 1,587 5 Michigan - 6 248 12 314 27 412 31 Minnesota - 6 59 24 861 7 1,683 4 Mississippi - 6 12 28 330 26 678 25 Missouri - 6 8 29 284 28 966 20 Montana - 6 68 23 538 16 1,353 11 Nebraska - 6 155 16 691 11 1,388 9 New Jersey - 6 - 30 - 35 - 40 New Mexico - 6 - 30 10 34 1,002 19 New York - 6 87 22 156 30 258 33 North Carolina - 6 298 10 848 8 1,386 10 North Dakota - 6 23 27 338 25 653 26 Ohio 149 3 505 5 791 10 1,196 14 Oklahoma (76) 41 94 20 340 24 482 29 Oregon - 6 573 3 1,364 1 1,945 2 Pennsylvania 37 5 610 2 671 12 762 22 Rhode Island - 6 105 19 668 13 1,230 13 South Carolina - 6 - 30 - 35 - 40 Utah - 6 - 30 93 32 1,443 8 Vermont - 6 40 25 580 14 1,120 16 Virginia - 6 - 30 - 35 113 38 West Virginia - 6 - 30 500 17 1,125 15 Wisconsin - 6 157 15 1,108 4 2,231 1 42 State Average $ 4 $162 $455 $861 * No dependents, filers aged 65 or older.


17

Comparison of Tax Year 2003 and Tax Year 2006 Results The following table compares the results from our previous (tax year 2003) study with the results from our current (tax year 2006) study on a state-specific basis. Astute readers may notice that net taxes often decline from the previous study – see our FAQ section for information regarding this phenomenon.


18

Table 8: Comparison of Tax Year 2003 and Tax Year 2006 Rank and Net Tax, by State, Filing Status, and Gross Income

[The nationwide average net tax equals 100.0]

ALABAMA ARIZONA ARKANSAS

Rank Net Tax as % of U.S. Average Rank Net Tax as % of

U.S. Average Rank Net Tax as % of

U.S. Average FILING STATUS

GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006

Single $10,000 5 5 239.5 260.0 32 21 40.4 70.1 23 23 64.9 65.8Single $20,000 12 11 118.0 125.3 36 36 68.0 67.1 21 22 101.7 96.8Single $35,000 26 24 90.3 95.7 40 40 62.5 60.7 15 21 109.2 104.8Single $50,000 38 36 72.5 73.9 40 39 60.1 58.7 18 17 111.0 105.5Single $75,000 39 38 64.8 68.4 40 40 61.7 60.4 12 13 112.8 113.1Single $100,000 40 38 62.0 63.5 39 39 64.6 61.9 14 14 111.5 111.7Single $150,000 41 40 59.4 61.0 39 39 66.4 63.4 13 14 111.2 110.9Single $250,000 41 41 55.8 56.7 37 39 69.6 66.4 17 14 109.7 111.0

Married $10,000 1 2 * * 28 25 * * 5 5 * * Married $20,000 2 1 * * 34 32 * * 4 6 * * Married $35,000 11 6 143.2 184.3 36 29 50.9 60.9 7 15 154.0 129.3Married $50,000 22 15 104.3 113.8 38 40 55.3 50.7 5 18 146.1 105.3Married $75,000 30 29 85.4 91.0 39 39 54.1 53.4 5 17 134.6 109.5Married $100,000 37 32 76.3 80.6 40 40 55.0 53.7 7 15 127.1 110.1Married $150,000 39 39 67.6 68.6 40 41 57.6 55.2 8 14 120.5 110.9Married $250,000 41 39 60.0 60.2 39 41 63.2 60.0 14 15 115.4 109.8Married $500,000 41 41 41.2 54.0 38 39 68.5 64.6 16 17 110.4 109.4Married $1,000,000 41 41 51.7 52.1 37 37 72.0 68.6 15 14 111.6 110.1

HHouse $10,000 1 2 * * 32 27 * * 11 10 * * HHouse $20,000 4 5 232.7 283.4 33 29 8.7 25.1 8 10 191.3 208.0Hhouse $35,000 17 13 111.6 120.4 38 37 49.6 48.2 7 10 131.2 126.9Hhouse $50,000 32 32 83.4 84.8 39 39 53.5 52.7 10 13 121.9 116.5Hhouse $75,000 37 36 83.1 74.5 40 39 53.0 50.7 8 9 120.8 118.0Hhouse $100,000 38 37 74.1 67.9 41 41 54.4 51.9 10 9 116.7 117.8

Senior $10,000 1 2 * * 35 39 * * 6 36 * * Senior $20,000 5 4 502.7 349.2 40 26 NA 21.5 13 21 128.8 57.6Senior $35,000 8 6 183.3 220.7 25 23 74.4 80.7 15 22 128.0 81.7Senior $50,000 22 12 100.4 154.2 27 27 65.9 71.0 25 23 85.0 87.2

* Net taxes as a percent of average are not calculated for lower incomes in which the U.S. average taxes are less than $50 because resulting percentage comparisons to national averages can be misleading. NA: Not applicable, since net state tax is negative largely due to state earned income tax credit program benefits. Result of 0.0 indicates no net state tax liability.


19

Table 8 (contd): Comparison of Tax Year 2003 and Tax Year 2006 Rank and Net Tax, by State, Filing Status, and Gross Income


CALIFORNIA COLORADO CONNECTICUT




GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006



HHouse $10,000 11 10 NA * 11 10 NA * 11 10 NA * HHouse $20,000 35 33 0.0 0.0 23 19 105.7 110.4 34 32 2.3 3.1HHouse $35,000 42 42 1.0 4.9 30 30 85.4 85.1 41 41 30.3 31.7HHouse $50,000 42 42 24.3 21.0 31 31 83.7 89.2 36 28 72.8 92.9HHouse $75,000 39 38 65.2 51.1 36 31 80.1 84.0 30 21 88.5 103.9HHouse $100,000 29 34 90.1 80.1 37 32 78.6 80.8 26 20 95.7 105.6

Senior $10,000 6 6 * * 6 6 * * 6 6 * * Senior $20,000 25 30 0.0 0.0 25 30 0.0 0.0 25 30 0.0 0.0Senior $35,000 34 35 8.8 0.0 36 35 1.3 0.0 37 33 0.0 12.5Senior $50,000 34 35 32.9 19.1 38 37 20.2 13.7 40 32 0.0 34.1



20



DELAWARE DISTRICT OF COLUMBIA GEORGIA




GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006



HHouse $10,000 11 10 * * 36 40 * * 8 9 * * HHouse $20,000 18 33 122.0 0.0 15 36 135.3 NA 14 12 154.3 187.6HHouse $35,000 24 21 97.6 101.9 3 4 161.7 150.8 14 14 115.0 119.9HHouse $50,000 29 27 86.2 95.6 4 8 136.6 123.9 27 24 94.5 99.0HHouse $75,000 31 28 86.6 94.7 2 6 141.2 128.9 26 27 93.3 96.8HHouse $100,000 32 25 88.6 96.1 2 5 141.3 129.8 27 26 92.1 94.8




21



HAWAII IDAHO ILLINOIS




GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006



HHouse $10,000 10 5 * * 30 26 * * 7 7 * * HHouse $20,000 6 2 207.3 301.4 28 26 63.7 56.6 16 14 134.3 156.6HHouse $35,000 4 3 150.0 156.6 21 23 102.3 97.8 33 32 78.5 82.0HHouse $50,000 22 12 105.7 116.7 11 9 120.7 121.3 34 34 77.6 75.8HHouse $75,000 16 13 109.3 116.3 7 8 121.3 123.8 38 37 67.2 70.1HHouse $100,000 12 10 113.7 117.6 6 8 122.2 124.3 39 38 60.2 65.0

Senior $10,000 33 37 * * 36 40 * * 6 4 * * Senior $20,000 11 9 161.3 205.9 39 42 NA NA 24 8 1.8 207.2Senior $35,000 13 19 137.3 94.1 20 20 101.4 88.4 28 21 47.7 85.1Senior $50,000 17 28 115.1 68.4 16 18 117.8 119.3 33 30 38.2 53.8



22



INDIANA IOWA KANSAS




GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006



HHouse $10,000 9 4 * * 11 10 * * 38 38 * * HHouse $20,000 12 7 160.7 249.1 19 17 121.3 138.2 38 39 NA NA HHouse $35,000 19 11 109.0 122.2 13 12 118.7 121.6 27 26 90.5 94.5HHouse $50,000 23 16 104.3 110.8 15 15 113.4 114.8 26 22 98.3 102.4HHouse $75,000 28 25 90.5 101.7 15 15 109.5 113.1 22 19 102.1 106.0HHouse $100,000 34 28 83.9 94.0 16 14 108.4 110.5 21 17 102.4 106.3




23



KENTUCKY LOUISIANA MAINE




GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006



HHouse $10,000 3 10 * * 11 10 * * 11 10 * * HHouse $20,000 3 1 240.7 335.1 20 16 118.3 140.7 32 31 31.7 16.0HHouse $35,000 5 5 147.7 149.2 29 28 87.6 90.8 26 29 91.8 89.1HHouse $50,000 6 6 125.4 126.8 24 23 103.9 100.6 9 7 122.1 124.2HHouse $75,000 13 12 113.7 116.5 25 26 95.6 101.7 4 5 131.3 133.8HHouse $100,000 17 16 108.2 110.0 30 27 89.6 94.1 3 3 132.1 134.6




24



MARYLAND MASSACHUSETTS MICHIGAN




GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006

Single $10,000 3 4 302.6 277.5 12 12 163.2 164.7 8 42 208.8 NA Single $20,000 2 1 190.4 207.4 7 9 133.6 135.6 11 17 119.2 113.8 Single $35,000 2 1 157.9 168.2 17 15 107.8 109.2 16 29 108.6 87.4 Single $50,000 2 2 140.5 143.8 13 15 113.1 112.6 17 30 111.2 87.6 Single $75,000 4 3 132.6 135.2 20 18 103.2 106.2 23 34 99.7 81.0 Single $100,000 4 3 129.3 131.7 25 21 98.2 102.2 28 35 94.1 77.3 Single $150,000 5 5 125.0 126.8 26 23 93.3 98.0 30 37 88.6 73.4 Single $250,000 8 8 122.1 125.4 30 28 88.5 92.2 33 37 83.5 68.6

Married $10,000 35 36 * * 34 34 * * 30 35 * * Married $20,000 35 35 * * 36 38 * * 9 10 * * Married $35,000 5 13 166.6 136.8 21 23 97.2 91.5 13 17 127.1 114.8Married $50,000 6 14 144.9 120.7 17 9 112.7 125.7 10 16 129.5 113.2 Married $75,000 3 3 137.2 140.6 20 20 103.2 106.3 18 30 109.8 87.7 Married $100,000 4 5 131.7 135.9 21 20 99.2 103.6 19 30 101.9 82.5 Married $150,000 6 6 126.6 129.0 24 23 96.6 99.0 26 35 94.8 76.6 Married $250,000 7 6 122.8 126.2 26 26 90.6 93.4 31 37 87.2 70.8 Married $500,000 11 8 119.8 122.4 31 29 85.7 88.7 33 38 81.3 66.2 Married $1,000,000 13 10 118.9 121.7 31 29 83.7 86.3 33 39 78.7 64.0

HHouse $10,000 35 35 * * 34 34 * * 5 36 * * HHouse $20,000 35 33 0.0 0.0 25 27 78.0 54.3 9 11 188.7 203.5 HHouse $35,000 2 2 165.9 179.0 20 19 104.1 104.9 12 24 120.8 95.6 HHouse $50,000 1 2 146.0 146.3 14 18 114.1 109.0 8 29 122.2 91.6 HHouse $75,000 3 3 136.5 138.5 21 17 105.8 109.0 20 30 107.6 87.1 HHouse $100,000 4 4 132.1 133.7 22 21 100.9 104.6 23 31 100.3 81.7

Senior $10,000 6 6 * * 6 6 * * 41 6 * * Senior $20,000 1 6 661.3 270.8 4 11 522.5 182.5 41 12 NA 153.6Senior $35,000 3 15 255.9 126.5 4 2 214.0 247.4 26 27 67.6 69.1Senior $50,000 4 21 201.9 90.1 14 5 126.2 184.4 24 31 87.8 47.9



25



MINNESOTA MISSISSIPPI MISSOURI




GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006

Single $10,000 22 28 85.1 39.6 30 27 44.7 47.8 25 25 54.4 50.4 Single $20,000 19 20 108.4 107.9 34 32 72.0 76.0 31 30 78.6 80.1 Single $35,000 14 17 109.5 107.6 34 32 81.2 83.7 31 31 84.9 86.5 Single $50,000 11 10 116.1 119.3 35 35 81.2 74.1 36 34 80.5 79.2 Single $75,000 9 11 114.7 117.3 35 35 80.7 79.4 31 31 84.0 82.5 Single $100,000 7 10 117.5 119.1 33 36 80.4 76.8 32 32 86.0 84.5 Single $150,000 10 9 119.1 120.6 34 36 78.8 75.2 31 30 88.0 86.2 Single $250,000 9 9 121.9 123.0 34 36 77.7 74.2 28 31 89.4 86.6

Married $10,000 39 39 * * 5 5 * * 5 5 * * Married $20,000 42 41 * * 20 18 * * 19 16 * * Married $35,000 26 36 79.1 39.5 29 27 68.7 74.2 25 22 82.6 95.3 Married $50,000 23 23 102.1 101.2 33 37 79.1 59.6 27 28 88.8 89.0 Married $75,000 19 19 107.5 107.8 33 35 82.0 75.5 31 32 84.2 84.4 Married $100,000 18 16 106.7 109.0 34 36 81.2 76.0 35 33 79.7 79.3 Married $150,000 14 12 111.4 111.5 34 36 80.1 75.9 32 31 84.8 80.2 Married $250,000 10 11 117.7 116.6 34 36 78.2 72.7 30 31 87.5 82.3 Married $500,000 10 9 121.7 121.1 34 36 77.2 72.1 28 31 89.2 84.6 Married $1,000,000 9 9 122.6 122.7 35 35 76.8 73.2 27 30 90.6 86.3

HHouse $10,000 39 39 * * 11 10 * * 11 10 * * HHouse $20,000 40 40 NA NA 25 23 78.0 95.4 24 20 93.0 100.9 HHouse $35,000 22 22 99.1 98.4 32 31 80.6 84.2 28 27 90.0 92.1 HHouse $50,000 17 14 113.0 115.2 33 35 81.1 74.7 30 33 85.2 84.4 HHouse $75,000 12 11 114.3 116.9 35 35 81.8 76.2 32 32 85.2 83.3 HHouse $100,000 12 12 113.7 115.5 36 36 78.8 77.7 33 30 87.2 86.0




26



MONTANA NEBRASKA NEW JERSEY




GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006



HHouse $10,000 6 8 * * 11 33 * * 37 37 * * HHouse $20,000 13 13 155.7 159.2 27 30 75.7 16.6 42 22 NA 99.9 HHouse $35,000 18 18 109.2 105.5 34 35 69.5 67.7 39 38 42.1 44.0 HHouse $50,000 13 19 116.4 107.7 28 30 90.3 91.3 40 40 42.8 41.8 HHouse $75,000 9 18 119.6 108.6 24 23 100.9 103.2 42 42 41.3 45.5 HHouse $100,000 8 15 118.9 110.1 20 19 103.6 105.8 40 40 59.6 58.9

Senior $10,000 6 6 * * 6 6 * * 6 6 * * Senior $20,000 9 23 229.7 42.2 15 16 110.8 96.1 25 30 0.0 0.0 Senior $35,000 11 16 165.2 118.2 18 11 118.1 151.8 37 35 0.0 0.0 Senior $50,000 3 11 203.0 157.2 12 9 129.5 161.3 40 40 0.0 0.0



27



NEW MEXICO NEW YORK NORTH CAROLINA




GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006

Single $10,000 35 40 32.5 NA 27 26 49.1 48.0 6 6 238.6 253.2 Single $20,000 38 39 53.6 35.8 29 28 81.1 85.4 4 4 147.2 155.0 Single $35,000 33 34 81.2 75.1 22 19 101.9 105.1 5 4 132.8 136.9 Single $50,000 28 33 89.9 80.4 9 12 118.7 117.2 6 5 125.9 131.1 Single $75,000 24 33 99.4 82.0 8 12 115.0 115.0 6 6 121.2 128.1 Single $100,000 22 33 102.0 81.7 11 13 113.1 112.6 6 6 121.2 125.9 Single $150,000 19 34 105.7 80.6 9 11 120.7 118.9 8 7 121.4 124.8 Single $250,000 18 32 109.4 80.9 10 12 120.0 115.1 6 6 125.0 128.2

Married $10,000 5 28 * * 40 41 * * 5 5 * * Married $20,000 21 29 * * 40 42 * * 18 17 * * Married $35,000 38 40 33.7 14.2 24 42 82.9 NA 16 14 113.2 134.3 Married $50,000 37 39 63.1 57.4 21 36 106.7 65.1 13 12 118.6 122.2 Married $75,000 32 34 82.7 76.2 16 27 112.6 93.4 11 6 117.7 125.2 Married $100,000 27 34 91.4 79.1 12 29 114.9 85.4 9 1 121.4 156.7 Married $150,000 22 32 98.9 79.6 7 11 123.7 114.1 10 2 118.5 142.1 Married $250,000 18 33 107.0 80.5 6 10 124.3 118.2 9 3 122.0 132.9 Married $500,000 17 32 110.3 80.4 12 15 119.7 111.7 6 6 125.5 129.3 Married $1,000,000 16 32 111.3 79.8 10 12 120.9 111.5 8 6 125.8 130.0

HHouse $10,000 11 29 * * 42 41 * * 11 10 * * HHouse $20,000 30 37 38.7 NA 39 42 NA NA 10 9 187.7 218.6 HHouse $35,000 37 39 62.1 43.0 25 34 93.7 68.6 8 8 130.7 134.2 HHouse $50,000 35 36 77.1 72.2 12 26 116.7 95.8 7 5 124.5 129.8 HHouse $75,000 27 34 91.4 77.1 11 20 116.7 104.5 10 7 119.4 125.1 HHouse $100,000 25 35 97.6 79.2 11 22 114.7 103.7 7 6 119.9 129.7

Senior $10,000 6 6 * * 6 6 * * 6 6 * * Senior $20,000 25 30 0.0 0.0 25 22 0.0 53.6 7 10 450.5 184.3 Senior $35,000 33 34 16.7 2.2 32 30 21.7 34.3 6 8 207.3 186.5Senior $50,000 19 19 110.6 116.4 36 33 28.4 30.0 8 10 169.9 161.1



28



NORTH DAKOTA OHIO OKLAHOMA




GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006







29



OREGON PENNSYLVANIA RHODE ISLAND




GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006



HHouse $10,000 11 28 * * 4 6 * * 31 30 * * HHouse $20,000 1 3 278.3 298.3 2 4 256.7 291.1 37 38 NA NA HHouse $35,000 1 1 177.2 179.4 15 15 113.1 110.2 35 33 69.4 68.9 HHouse $50,000 2 1 145.4 153.3 21 25 107.4 98.0 37 37 69.9 70.8 HHouse $75,000 1 1 143.9 147.1 29 29 90.2 88.2 34 40 82.6 50.7 HHouse $100,000 1 1 143.9 145.8 35 33 81.4 80.5 31 39 88.9 60.8




30



SOUTH CAROLINA UTAH VERMONT




GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006

Single $10,000 27 30 49.1 35.4 21 24 86.8 64.2 29 41 45.6 NA Single $20,000 28 31 82.9 78.0 10 15 121.5 117.5 33 34 73.0 72.6 Single $35,000 19 22 106.2 104.8 11 12 116.8 116.0 39 38 67.2 67.5 Single $50,000 12 13 114.2 116.1 14 11 112.8 117.9 32 32 82.4 80.9 Single $75,000 13 10 112.7 117.5 16 14 106.4 111.6 28 28 93.3 92.0 Single $100,000 13 11 111.7 114.6 18 19 103.8 105.7 23 24 100.7 98.9 Single $150,000 14 13 110.3 112.4 24 21 99.7 100.6 15 16 108.8 107.9 Single $250,000 16 13 110.3 111.7 25 23 96.5 97.4 13 11 118.8 118.5


HHouse $10,000 11 10 * * 11 10 * * 41 42 * * HHouse $20,000 31 25 34.7 68.6 21 18 116.7 111.7 41 41 NA NA HHouse $35,000 31 25 81.3 95.5 16 17 112.7 108.2 36 36 66.7 66.2 HHouse $50,000 25 11 103.3 117.1 16 10 113.2 118.7 38 38 68.5 69.5 HHouse $75,000 19 10 107.9 117.7 18 16 108.2 110.8 33 33 83.6 81.1 HHouse $100,000 15 11 108.5 115.9 19 18 104.4 106.0 28 29 91.5 89.5

Senior $10,000 6 6 * * 6 6 * * 42 6 * * Senior $20,000 25 30 0.0 0.0 25 30 0.0 0.0 42 25 NA 24.5Senior $35,000 37 35 0.0 0.0 31 32 25.8 20.4 42 14 NA 127.4Senior $50,000 40 40 0.0 0.0 9 8 150.8 167.7 29 16 64.8 130.1



31



VIRGINIA WEST VIRGINIA WISCONSIN




GROSS INCOME 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006 2003 2006

Single $10,000 37 14 7.0 133.6 38 8 0.0 225.0 42 29 NA 36.2 Single $20,000 15 14 112.7 117.9 20 19 103.0 108.3 26 21 85.9 102.2 Single $35,000 20 16 105.3 108.2 29 27 86.3 89.0 10 10 117.7 117.0 Single $50,000 22 20 99.4 101.9 23 24 98.3 98.9 8 6 119.4 130.6 Single $75,000 26 25 95.8 97.8 22 21 101.3 104.9 11 7 114.5 124.9 Single $100,000 27 25 94.1 98.8 19 16 102.8 107.5 15 9 109.3 120.2 Single $150,000 27 25 91.8 96.2 20 15 103.4 109.0 17 12 106.2 115.4 Single $250,000 26 27 91.0 92.8 20 19 102.4 106.9 21 15 102.2 110.6






32



33

IV. Appendix A: Methodology The report calculates income tax burdens for tax year 2006 using The National Bureau of Economic Research’s state and federal tax liability calculator (Internet TAXSIM 8.2) using a set of state-specific assumptions regarding income, deductions, and other tax provision data. Initially a tax profile was compiled for the State of Minnesota using data supplied to the Minnesota Taxpayers Association by the Minnesota Department of Revenue (DOR) which included: wage income; wage split (between spouses where appropriate); taxable dividends; taxable interest; other taxable items; taxable pensions; gross Social Security income; property taxes paid; other itemized deductions; mortgage interest; and capital gains. DOR research staff used aggregate tax year 2006 return data to generate these profiles. We adjusted itemized deductions on a state-specific basis using Statistics of Income from the Internal Revenue Service, which included the amount and number of returns with taxes paid, amount and number of returns with mortgage interest paid, the amount and number of returns with contributions, and the amount and number of returns with itemized deductions for all other states. Using these data we calculated ratios and adjusted the original tax profile for all other states and the District of Columbia. We then uploaded tax data to the TAXSIM calculator to produce federal, state, and Social Security payroll tax liabilities. Lastly, we sorted liabilities and rank ordered by greatest amount. Filer Types, Income Levels and Profiles To determine the assumptions used in this report, the Minnesota Department of Revenue provided taxpayer profiles for four filer types and four to ten income levels. The filer types profiled for this report are Minnesota residents with wage income, no taxes paid to another state, and who are not claimed as a dependent on another tax return. Profile data was provided for single filers, married joint filers with two dependents, head of household filers with 0-2 dependents (the sample size was too small to provide data for two dependents only), and senior citizens (aged 65 and older) filing jointly. For the married filing joint calculations, incomes are assumed to be earned by the two spouses in a split as suggested by actual wage splits on married joint returns, varying by income. For married filers, the ten gross incomes selected for study are $10,000, $20,000, $35,000, $50,000, $75,000, $100,000, $150,000, $250,000, $500,000, and $1,000,000. For singles, the top two incomes were excluded, while for heads of households, the top four were excluded. For seniors, only the lowest four incomes were studied. Higher income levels were not included because of small sample size problems. 2006 income tax returns were aggregated and median values provided by assuming some range of income around each of the income levels used. Itemizers and the 50% Rule Separate profile data was provided for itemizers and non-itemizers. If more than 50% of filers at a given income level itemized deductions, profile data for itemizers was used to determine assumptions, and conversely, if less than 50% itemized, profiles for non-itemizers were used. The data shows that at $35,000 and under taxpayers tend to be non-itemizers. Consequently, we assume taxpayers use the standard deduction at and below $35,000, and

Appendix A: Methodology

34

itemize starting at $50,000 of gross income. Moreover, the data also indicates that all senior citizens filing jointly should be considered non-itemizers. The 50% rule was used for all line items of the return. For all filer types, whenever fewer than 50% of filers at a given income level reported data for a given line item, that line item was assumed to be zero. Median values for each item passing the 50% rule were used in this study. Other Assumptions All calculations, except those for senior citizens filing jointly, assume taxpayers are under 65 years of age. As indicated above, any tax provision used by at least 50% of the filers in the Minnesota Revenue sample is included in this study. If taxpayers are qualified for certain provisions, Internet TAXSIM 8.2 includes the provision if relevant data are entered into the calculator. Circuit Breakers and Other Property Tax Relief and Rebates Many states offer property tax relief, whether through a circuit-breaker system or through a property tax or rent rebate or credit. Some states, such as Michigan, offer the program directly on the income tax return; other states, such as Minnesota, require a separate filing. We have not included any of these provisions in this iteration of our income tax burden study. Although Internet TAXSIM 8.2 purports to calculate the effects of property tax relief programs, it is not entirely clear at this point that the program does so correctly (we do believe, however, that it correctly calculates income tax liabilities). It does not seem appropriate to include property tax relief programs in certain states based entirely on the mechanism used to deliver the relief. Therefore, we are not including property tax relief programs as part of this report. We do look forward to working with NBER to improve their property tax relief simulation in the hopes of incl

Comparison of 2006 Individual Income Tax Burdens by State...another NTC member association (see...

Documents

Transcript of Comparison of 2006 Individual Income Tax Burdens by State...another NTC member association (see...