Depending on what state you live in, your politicians are either slowly lowering your income taxes with a possible target of zero percent, or they’re raising them, and the sky is the limit. That’s an oversimplification of what Jared Walczak has written at the Tax Foundation regarding the divergence in state tax rates. He begins:
There was a time not too long ago when it was possible to speak of a “typical” state income tax with a top rate of about 6 percent. That is no longer the case. Today, far more states prioritize low, competitive rates, whereas a smaller number have abandoned the middle for much higher rates.
Two decades ago, 21 states had top rates between 5 and 7 percent. Today, there are 12. In 2006, 15 states had rates below 5 percent (including those with no tax on wage income); now it’s 26. In 2006, only one state had a double-digit top rate, whereas six do today—a count that could increase under pending legislation.
Twenty-three states have reduced their top marginal income tax rates since 2021, while six states and the District of Columbia have raised them (counting two that imposed uncapped wage taxes). Both the average and median top rate on wage income are now 5.0 percent, with recent cuts accelerating a trend of rate reductions dating back three decades.
Take a look at Walczak’s chart here, and you’ll see that the mid-range tax rate groups, marked in dark blue and yellow, are narrowing, while the highest tax range in brown, and the lower range in lighter blue are growing.
You can see the divergence again on another of Walczak’s charts, below. In 2006 the states’ income tax rates were clustered, but now they are spreading wider as some reduce rates toward zero, and others increase rates above 10%.
Action Line: Whatever state you’re in, you need to be concerned when politicians begin digging through your couch cushions looking for your spare change to fund their political agendas. Sometimes, it may even make sense to move. If you’re planning a move to a better America, begin your search with Your Survival Guy’s 2025 Super States, and click here to subscribe to my free monthly Survive & Thrive letter, and be among the first to receive my forthcoming 2026 Super States rankings.
