A Look At State Income Tax Rates In 2023—And What Else To Consider

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Many taxpayers now have the flexibility to move to what they believe are more tax-friendly locations where they can pay less in state income taxes. So what do tax rates look like across the country in 2023?

In contrast, seven states don't have any individual income taxes: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming.States that do impose tax are heavily reliant on those income tax streams. Individual income taxes comprised 40% of state tax revenues in fiscal year 2020, the latest year for which data is available.

Not all states tipped rates downward: Massachusetts increased its individual income tax rate in 2022. The state added a 4% surtax to the 5% individual income tax rate for annual income above $1 million. You can also find a millionaire's tax in California, New Jersey, New York, and the District of Columbia.A zero or low-rate state income tax doesn't necessarily mean that your overall tax burden in those states is smaller.

Importantly, when it comes to sales taxes, you shouldn't just focus on the rate but also the tax base, meaning what, exactly, is being taxed? South Dakota—another zero income tax state—a sales tax on “the gross receipts of all retail sales, including the sale, lease, or rental of personal property or any product transferred electronically, and the sale of services.

 

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