Talk:State income tax/Archive 1

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Archive 1

Montana

All sources i've looked at seem to indicate that Montana has a maximum of 6.9% for individuals. Where is the 11% coming from? Queue 07:07, 15 February 2007 (UTC)

Not sure but I corrected it. Perhaps it was 11% at some point in the past or just a mistake. In the future, please refrain from adding big banners exclaiming the factual accuracy of the entire article for such a small error. Use a {{fact}} tag at the end of the sentence and discuss in the talk as you have posted. Better yet - make the correction yourself (since you looked it up) and add the reference. Article Banners are a last resort after tags and talk have not corrected the problem. An article banner reflects the entire article, so keep that in mind when you do take that step. There are often section banners or in this case sentence tags that would have been more appropriate. Anyway - thanks for pointing out the error. I would like to make a table that shows all state income taxes. This would have been helpful in this case. Morphh (talk) 16:35, 15 February 2007 (UTC)

Merge

Seems like List of U.S. states without a personal income tax would be good article to merge and redirect into this one. Morphh (talk) 15:18, 5 December 2006 (UTC)

  1. Support - Per my nom. Morphh (talk) 15:18, 5 December 2006 (UTC)
I went ahead and made this change.. being bold. Morphh (talk) 19:58, 7 December 2006 (UTC)

Table

I think it would be nice to create a table in this article that lists every state and its income tax. Morphh (talk) 20:12, 30 January 2007 (UTC)

Texas franchise tax (margin tax)

The new Texas franchise tax (margin tax), which replaces the old franchise tax, is not a gross receipts tax. There are numerous deductions allowed. Also, the tax does apply to some but not all partnerships, as well as various other kinds of entities. Corrections made in the article. Famspear (talk) 14:08, 16 May 2008 (UTC)

Washington

The Business & Occupation Tax applies to sole proprietorships as well as corporations. I finally found the explicit answer to this in the tax brochure, which I added as a new reference. Bob Stein - VisiBone (talk) 23:02, 25 October 2008 (UTC)

more informative map to include highest rate

I hoped to find a more informative map, perhaps with the highest income tax rates by state, like this one for sales taxes: http://www.thestc.com/STrates.stm —Preceding unsigned comment added by 76.101.175.157 (talk) 03:30, 15 February 2009 (UTC)

State corporate income tax

This article, while titled "State income tax", only discusses state personal income tax. What about state corporate income tax? 148.87.1.172 (talk) 19:48, 24 July 2009 (UTC)

I will enhance article for multistate corporate tax over next few weeks. Outline now in articleOldtaxguy (talk) 13:07, 12 June 2010 (UTC)
I revised an edit citing taxfoundation.org, which is incorrect. Texas has a franchise tax with an income component. Oldtaxguy (talk) 22:19, 17 August 2010 (UTC)

California rates are wrong?

I think the California tax rates are stated incorrectly. The maximum California rate appears to be 10.55 percent, not 10.3%. See: http://www.ftb.ca.gov/forms/2010_California_Tax_Rates_and_Exemptions.shtml. —Preceding unsigned comment added by 99.161.122.14 (talk) 18:32, 28 September 2010 (UTC)

Proposed enhancement - help needed

I will attempt to somewhat enhance this article, or at least get the process started. There's a lot of material in the introduction that dives deep, with no overview. There are also some statements that are false. There's far too much focus on rate comparisons among the states. Here's a proposed outline:

  • Intro: 3 paragraphs providing broad overview with no state-by-state details
  • Basic principles
    • Taxable income; relation to Federal
    • Filing status and rates: summaries only, not tables
    • Returns, assessment, appeals
  • Individual income tax
  • Corporate tax (section likely to be changed only a little, except to prevent overlap with next item)
  • Multi-state taxpayers
  • History (a real history, not two bullet points on specific items)
  • See also, references, additional reading, etc

Comments encouraged in this space. Oldtaxguy (talk) 19:09, 14 January 2011 (UTC)

Draft follows (without the map and banner). In the draft, I have eliminated linking to geographic names per WP:Overlink. I have eliminated state-specific items except where they are exemplary of at least a few states, or where they contrast to a general pattern.

Comments please! Oldtaxguy (talk) 04:09, 5 February 2011 (UTC)

GREAT JOB Oldtaxguy! While I'm sure much more will be done in the great spontaneous order of Wikipedia, this is a great start, and the article reads MUCH better now. Thanks. N2e (talk) 02:51, 16 February 2011 (UTC)

State income tax (draft of article)

43 states and many localities in the United States impose an income tax on individuals. 47 states and many localities impose a tax on the income of corporations.[1] State and local income taxes are imposed in addition to Federal income tax. State income tax is allowed as a deduction in computing Federal income tax, subject to limitations for individuals. Some localities impose an income tax, often based on state income tax calculations.

State income tax is imposed at a fixed or graduated rate on the taxable income of individuals, corporations, and certain estates and trusts. The rates vary by state. Taxable income conforms closely to Federal taxable income in most states, with limited modifications.[2] The states are prohibited from taxing income from Federal bonds or other obligations. Most do not tax Social Security benefits or interest income from obligations of that state. Several states require different lives and methods be used by businesses in computing the deduction for depreciation. Many states allow a standard deduction or some form of itemized deductions. States allow a variety of tax credits in computing tax.

Each state administers its own tax system. Many states also administer the tax return and collection process for localities within the state that impose income tax.

Basic principles

State tax rules vary widely. Those states imposing a tax on income compute the tax as a tax rate times taxable income as defined by the state. The tax rate may be fixed for all income levels and taxpayers of a certain type, or it may be graduated, that is, the tax rates on higher amounts of income are higher than on lower amounts. Tax rates may differ for individuals and corporations.

Most states conform to Federal rules for determining:

  • gross income,
  • timing of recognition of income and deductions,
  • most aspects of business deductions,
  • characterization of business entities as either corporations, partnerships, or disregarded.

Gross income generally includes all income earned or received from whatever source, with exceptions. The states are prohibited from taxing income from Federal bonds or other obligations.[3] Most states also exempt income from bonds issued by that state or localities within the state, as well as some portion or all of Social Security benefits. Many states provide tax exemption for certain other types of income, which varies widely by state. The states imposing an income tax uniformly allow reduction of gross income for cost of goods sold, though the computation of this amount may be subject to some modifications.

Most states provide for modification of both business and non-business deductions. All states taxing business income allow deduction for most business expenses. Many require that depreciation deductions be computed in manners different than at least some of those permitted for Federal income tax purposes. For example, many states do not allow the additional first year depreciation deduction.

Most states tax capital gain and dividend income in the same manner as other investment income. In this respect, individuals and corporations not resident in the state generally are not required to pay any income tax to that state with respect to such income.

Some states have alternative measures of tax. These include analogs to the Federal Alternative Minimum Tax in 14 states,[4] as well as measures for corporations not based on income, such as capital stock taxes imposed by many states.

Income tax is self assessed, and individual and corporate taxpayers in all states imposing an income tax must file tax returns in each year their income exceeds certain amounts determined by each state. Returns are also required by partnerships doing business in the state. Many states require that a copy of the Federal income tax return be attached to at least some types of state income tax returns. The time for filing returns varies by state and type of return, but for individuals in many states is the same as the Federal deadline (typically April 15).

Every state, including those with no income tax, has a state taxing authority with power to examine (audit) and adjust returns filed with it. Most tax authorities have appeals procedures for audits, and all states permit taxpayers to go to court in disputes with the tax authorities. Procedures and deadlines vary widely by state. All states have a statute of limitations prohibiting the state from adjusting taxes beyond a certain period following filing returns.

All states have tax collection mechanisms. States with an income tax require employers to withhold state income tax on wages earned within the state. Some states have other withholding mechanisms, particularly with respect to partnerships. Most states require taxpayers to make quarterly payments of tax not expected to be satisfied by withholding tax.

All states impose penalties for failing to file required tax returns and/or pay tax when due. In addition, all states impose interest charges on late payments of tax, and generally also on additional taxes due upon adjustment by the taxing authority.


Individual income tax

43 states impose a tax on the income of individuals, sometimes referred to as personal income tax. Tax rates vary widely. The income subject to tax varies by state. Some states impose the tax on Federal taxable income with minimal modifications, while others tax a measure bearing little resemblance to Federal taxable income.Cite error: A <ref> tag is missing the closing </ref> (see the help page).

  • South Dakota – no individual income tax, but has a state corporate income tax on financial institutions.
  • Tennessee – does have tax on income (at a 6% rate) received from stocks and bonds not taxed ad valorem (Tenn Const Art II, §28). In 1932, the Tennessee Supreme Court struck down a broad-based individual income tax that had passed the General Assembly [Evans v. McCabe]. However, a number of Attorneys General have recently opined that, if properly worded, an income tax would be found constitutional by today's court. This is due to a 1971 constitutional amendment. (see Tenn. AG Op #99-217, Paul G. Summers [1])
  • Texas – no individual income tax or corporate income tax. In May 2007, the legislature replaced the franchise tax with a gross margins tax on businesses (sole proprietorships and some partnerships were automatically exempt; corporations with receipts below a certain level were also exempt), which was amended in 2009 to increase the exemption level. The Texas Constitution places severe restrictions on passage of a individual income tax and use of its proceeds.
  • Washington state – no individual tax, but has a Business and Occupation Tax (B&O) on gross receipts, applied to "almost all businesses located or doing business in Washington." It varies from 0.138% to 1.6% depending on the type of industry.[5][6]
  • Wyoming – has no individual or corporate income taxes.

U.S. States with a flat rate individual income tax

The following states have a flat rate individual income tax:[7]

  • Colorado - 4.63%
  • Illinois - 5%
  • Indiana - 3.4%
  • Massachusetts - 5.3%
  • Michigan - 4.35%
  • Pennsylvania - 3.07%
  • Utah - 5%

State corporate income tax

Most states impose a tax on income of corporations having sufficient connection ("nexus") with the state. Such taxes apply to U.S. and foreign corporations, and are not subject to tax treaties. Such tax is generally based on business income of the corporation apportioned to the state plus nonbusiness income only of resident corporations. Most state corporate income taxes are imposed at a flat rate and have a minimum amount of tax. Business taxable income in most states is defined, at least in part, by reference to Federal taxable income.

According to www.taxfoundation.org these states have no state corporate income tax as of Feb 1, 2010: Nevada, Washington, Wyoming, Texas, and South Dakota. However, Texas has a Franchise Tax based on "taxable margin", generally defined as sales less either cost of goods sold less compensation.[8][9]

Nexus

States are not permitted to tax income of a corporation unless four tests are met under Complete Auto Transit, Inc. v. Brady:

  • There must be a substantial connection (nexus) between the taxpayer's activities and the state
  • The tax must not discriminate against interstate commerce
  • The tax must be fairly apportioned
  • There must be a fair relationship to services provided

Apportionment

The courts have held that the requirement for fair apportionment may be met by apportioning between jurisdictions all business income of a corporation based on a formula using the particular corporation's details.[10] Many states use a three factor formula, averaging the ratios of property, payroll, and sales within the state to that overall. Some states weight the formula. Some states use a single factor formula based on sales.[11]

Nonbusiness income

Some states tax resident corporations on nonbusiness income regardless of apportionment. Generally, a resident corporation is one incorporated in that state. The definition of nonbusiness income varies, but generally includes investment income of business corporations, including dividends.

Consolidated or unitary filings

Some states require and some states permit parent/subsidiary controlled groups of corporations to file returns on a consolidated or combined basis. California and Illinois require that all U.S. members of a "unitary" group must file a combined return.

Returns

State corporate income tax returns vary highly in complexity from two pages to more than 20 pages. States often require that a copy of the Federal income tax return be attached to the state return. Corporate income tax return due dates may differ from individual tax return due dates. Most states grant extensions of time to file corporate tax returns.

History

State income taxes began with "faculty" taxes imposed based on occupation during Colonial times. However, prior to the Civil War, true income taxes. Income taxes accounted for only a negligible part of the $301 million total state taxes collected in 1913, the year the present Federal income tax was adopted. By FY 2004, income taxes (including corporate and individual) accounted for $223 billion of $581 billion of state taxes.[12]

Wisconsin in 1911 introduced a personal (individual) income tax administered by a state tax commission, with graduated rates from 1% to 6%.[13] Rhode Island did not have an income tax until 1971, but now it has one of the top five highest maximum rates in the nation.[14][15] New Jersey added an income tax component to the Corporation Business Tax in 1958.[16] New Jersey introduced a tax on gross income of individuals in 1976.

See also

References

  1. ^ The states with no individual income tax as of 2010 are Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas and Wyoming. The states with no corporate income tax as of 2010 are Nevada, South Dakota, and Wyoming. For tables of information on state taxes, see, e.g., 2009 State Tax Handbook, CCH, ISBN 973-0-8080-1921-3 (hereafter "CCH") or later editions, or All States Handbook, 2010 Edition, RIA Thomson, ISBN 978-0781104159 ("RIA") or later editions.
  2. ^ Exceptions are Alabama, Arkansas, Iowa, Mississippi, New Hampshire (interest and dividends only), New Jersey, Pennsylvania, and Tennessee (interest and dividends only), none of which use Federal taxable income as a starting point in computing state taxable income.
  3. ^ 31 USC 3124.
  4. ^ CCH, page 277.
  5. ^ Business and Occupation, Washington State Department of Revenue
  6. ^ Business and Occupation Tax brochure, Washington State Department of Revenue (2007)
  7. ^ Individual Income Tax Rates-2008
  8. ^ Texas Statutes Chapter 171 Section 171.101. CCH page 219.
  9. ^ Franchise Tax
  10. ^ See, e.g., the discussion in Hellerstein, Hellerstein & Youngman, State and Local Taxation, Chapter 8 section C. ISBN 0-314-15376-4.
  11. ^ For a compilation of formulas, see State Tax Handbook published annually by CCH.
  12. ^ Hellerstein & Hellerstein, State and Local Taxation, Cases and Materials, 2005, ISBN 0-314-15376-4, Chapter 1.
  13. ^ Hellerstein & Hellerstein, p. 928.
  14. ^ "Chapter VIII: Era of Transition". State of Rhode Island General Assembly. 2009-12-29. 
  15. ^ http://www.taxfoundation.org/research/topic/56.html (accessed Feb. 1, 2010)
  16. ^ New Jersey Division of Taxation Corporation Business Tax Overview.

External links

Category:Income taxes Category:State taxation in the United States

Oldtaxguy (talk) 04:09, 5 February 2011 (UTC)

Where is GaryFx?

I just checked this article for the very first time and saw 3 recent contributions from wikipedian GaryFx. I wanted to thank GaryFx for those contributions but it appears he is no longer a member of Wikipedia? Ottawahitech (talk) 14:11, 23 April 2011 (UTC)

That's news to me. It's been a while since I've contributed anything, but my account obviously still works. GaryFx (talk) 12:59, 28 April 2011 (UTC)

US-centric - suggest broadening or rename

Shouldn't article be called, e.g. "State income tax (United States)"? Is the US the only federation in the world whose states charged income tax? I know prior to 1942, Australia had state income tax, but since then it has been prohibited by the federal government. What about Mexico? Malaysia? I don't know. 60.225.114.230 (talk) 12:55, 16 April 2012 (UTC)

Please remember that this is the English Wikipedia you are viewing. Monterey Bay (talk) 16:40, 16 April 2012 (UTC)
Germany, Switzerland and Canada have sub-federal level income taxes (state, cantonal and provincial, respectively). Broading the article is required, as it is now U.S. oriented. Note that there are only a few federal republics in the world, and the others generally do not have sub-federal level income taxes. Oldtaxguy (talk) 20:33, 16 April 2012 (UTC)
I believe the correct name would be State income tax in the United States. --Orlady (talk) 20:42, 16 April 2012 (UTC)
"Please remember that this is the English Wikipedia you are viewing" ??? As if the USA is the only country in the world in which English is spoken! I think broadening or State income tax in the United States would be good. 60.225.114.230 (talk) 07:07, 18 April 2012 (UTC)

South Dakota State tax rates

South Dakota has a state sales and use tax, no individual or corporate income tax.

http://www.state.sd.us/drr2/businesstax/publications/taxfacts/usetax315.pdf — Preceding unsigned comment added by 192.236.42.142 (talk) 15:30, 20 August 2012 (UTC)