state individual income tax comparisons · source: s.c. department of revenue federal and state...
TRANSCRIPT
STATE INDIVIDUAL INCOME TAX COMPARISONS
REQUESTED BY
HOUSE TAX POLICY REVIEW COMMITTEE
By
Gordon O. Shuford
Economic Research
South Carolina Revenue and Fiscal Affairs Office
1000 Assembly Street
Rembert Dennis Building, Suite 402
Columbia, SC 29201
(803) 734-2265
www.rfa.sc.gov
STATE INDIVIDUAL INCOME TAX COMPARISONS
2012 Report
http://rfa.sc.gov/econ/reports/econanalysis
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MAJOR FINDINGS
• Forty-one states impose a broad based individual income tax.
• South Carolina has a relatively low individual income tax burden. Tax burden was the tenth lowest nationwide in tax year 2012.
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4Sources: State and Local Government Finances by Level of Government and by State: 2102, US Census Bureau and Internal Revenue Service, Statistics of Income Division, Individual Master File System, December 2013. Calculations by the S.C. Revenue and Fiscal Affairs Office.
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%
New YorkOregon
MarylandKentuckyDelawareCalifornia
MinnesotaConnecticut
West VirginiaMassachusetts
OhioNorth Carolina
MaineWisconsin
HawaiiIndiana
PennsylvaniaIllinois
VirginiaArkansas
IowaMissouri
KansasUtah
IdahoMontana
Rhode IslandNebraskaVermontGeorgia
New JerseySouth Carolina
AlabamaOklahoma
ColoradoMichigan
MississippiNew Mexico
LouisianaArizona
North Dakota
STATE AVERAGE EFFECTIVE INDIVIDUAL INCOME TAX RATESTax Year 2012
MAJOR FINDINGS Three Contributing Factors
• South Carolina taxpayers have lower incomes compared to taxpayers in other states.
• Tax deductions, exemptions, and brackets vary. South Carolina allows taxpayers to retain all federal deductions and exemptions and has a zero tax bracket.
• State tax rates vary widely. Top marginal tax rates ranged from 3.07% to 11%.
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LOWER FEDERAL ADJUSTED GROSS
INCOMES
6
7Source: Internal Revenue Service, Statistics of Income Division, Individual Master File System, December 2013. Calculations by the S.C. Revenue and Fiscal Affairs Office.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
MISSISSIPPIARKANSAS
FLORIDATENNESSEE
NEW MEXICOSOUTH CAROLINA
KENTUCKYIDAHO
ALABAMAWEST VIRGINIA
NEVADAMAINE
MONTANAGEORGIA
NORTH CAROLINAOHIO
LOUISIANAOKLAHOMA
MISSOURIINDIANA
SOUTH DAKOTAARIZONA
VERMONTMICHIGAN
TEXASOREGON
HAWAIIUTAH
WISCONSINKANSAS
US AverageNEBRASKA
PENNSYLVANIARHODE ISLAND
IOWANEW YORKWYOMING
CALIFORNIAILLINOIS
COLORADOMINNESOTA
NORTH DAKOTAWASHINGTON
NEW HAMPSHIREALASKA
VIRGINIAMASSACHUSETTS
MARYLANDNEW JERSEY
CONNECTICUTDELAWARE
TAX YEAR 2012 PERCENTAGE OF FEDERAL RETURNS UNDER $50,000 OF AGIBy State
8Source: Internal Revenue Service, Statistics of Income Division, Individual Master File System, December 2013. Calculations by the S. C. Revenue and Fiscal Affairs Office.
0% 2% 4% 6% 8% 10% 12% 14% 16%
DELAWARECONNECTICUT
NEW JERSEYMASSACHUSETTS
VIRGINIAMARYLANDCALIFORNIA
NEW YORKNORTH DAKOTA
COLORADOILLINOIS
WASHINGTONMINNESOTA
NEW HAMPSHIRETEXAS
US AverageALASKA
PENNSYLVANIAKANSAS
RHODE ISLANDGEORGIAFLORIDA
NEBRASKAOREGON
LOUISIANAARIZONA
WYOMINGNORTH CAROLINA
SOUTH DAKOTAOKLAHOMA
IOWAUTAH
MICHIGANVERMONT
HAWAIIMISSOURI
TENNESSEEWISCONSIN
NEVADAOHIO
MONTANASOUTH CAROLINA
ALABAMAINDIANA
MAINEARKANSAS
NEW MEXICOIDAHO
KENTUCKYMISSISSIPPI
WEST VIRGINIA
TAX YEAR 2012 PERCENTAGE OF FEDERAL RETURNS OVER $200,000 OF AGIBy State
9Source: Internal Revenue Service, Statistics of Income Division, Tax Year 2012. http://www.irs.gov/uac/SOI-Tax-Stats-Historic-Table-2 RFA: GOS: 09/07/16.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
South Carolina United States
FEDERAL ADJUSTED GROSS INCOME COMPONENTSAs a Percentage of Total Federal Adjusted Gross Income
Retirement Income
Investment Income
Business and PartnershipIncome
Salaries & Wages
10Source: Internal Revenue Service, Statistics of Income Division, Tax Year 2012. http://www.irs.gov/uac/SOI-Tax-Stats-Historic-Table-2 RFA: GOS: 09/07/16.
$35,245
$7,883
$4,692 $3,672
$43,463
$7,289 $8,130
$5,825
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
Salaries & Wages Retirement Income Investment Income Business and PartnershipIncome
FEDERAL ADJUSTED GROSS INCOME COMPONENTS Average Per Return
South Carolina United States
TAX STRUCTURE
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ADJUSTED GROSS INCOME AND TAXABLE INCOME
Married Filing Jointly Family of Four for Tax Year 2014
South Carolina Georgia North Carolina
Adjusted Gross Income $50,000 $50,000 $50,000
Less
Standard Deduction ($12,400) ($3,000) ($15,000)
Personal Exemptions ($15,800) ($13,400) $0
Equals
Taxable Income $21,800 $33,600 $35,000
Source: Tax rate and brackets for each state were obtained from 2012 state tax forms. Data compiled by the S.C. Revenue and Fiscal Affairs Office. GOS/09/09/16
13Source: Information on Deductions, exemptions, and tax brackets for each state were obtained from 2014 state tax forms.
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000
MaineRhode Island
South CarolinaIdaho
MinnesotaNew Mexico
North DakotaVermontColorado
UtahConnecticut
WisconsinArizona
LouisianaNebraska
MississippiMissouri
MontanaNew York
US AverageMaryland
GeorgiaOklahomaMichiganDelawareCalifornia
North CarolinaKansas
AlabamaOregon
MassachusettsVirginia
HawaiiOhio
IllinoisWest Virginia
IndianaIowa
ArkansasNew Jersey
KentuckyPennsylvania
TAXABLE INCOME REDUCTIONS BY STATE IN TAX YEAR 2014Combined Standard Deduction, Personal Exemptions, and Zero Tax Brackets
For a Married Filing Joint Return with Two Dependents
For states that allow a personal credit rather than a personal exemption, RFA calculates an exemption amount by dividing the
allowable personal credit by the highest marginal tax rate. This may overstate the value of the calculated personal exemption for
taxpayers with lower incomes.
14Source: S.C. Department of Revenue federal and state individual income tax return sample; Data compiled by S.C. Revenue and Fiscal Affairs. – LJ/09/12/16
$26,153
$11,026
$4,208 $3,857
$2,736$1,816
$1,323
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
Std
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FEDERAL AND STATE DEDUCTIONS FROM SOUTH CAROLINA INCOMETax Year 2014
Federal Deductions South Carolina Deductions
MARGINAL TAX RATES AND
EFFECTIVE TAX RATES
15
16
TAX LIABILITY CALCULATIONMarried Filing Jointly Family of Four
With Adjusted Gross Income of $50,000 in Tax Year 2014
South Carolina Georgia North Carolina
Taxable Income: $21,800 $33,600 $35,000
Tax RateTax
BracketsTax
Liability Tax RateTax
BracketsTax
Liability Tax RateTax
BracketsTax
Liability
0% $2,880 $0 1% $1,000 $10 5.8% NA $2,030
3% $5,760 $86 2% $3,000 $40
4% $8,640 $115 3% $5,000 $60
5% $11,520 $144 4% $7,000 $80
6% $14,400 $173 5% $10,000 $150
7% Over $518 6% Over $1,416
Total $1,036 $1,756 $2,030
Effective Tax Rate 2.1% 3.5% 4.1%
Source: Tax rate and brackets for each state were obtained from 2012 state tax forms. Data compiled by the S.C. Revenue and Fiscal Affairs Office. GOS/09/09/16
17Source: Tax rate and brackets for each state were obtained from 2012 state tax forms. Data compiled by the S.C. Revenue and Fiscal Affairs Office. GOS/09/09/16
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%
12.00%N
ew Y
ork
Ore
gon
Cal
ifo
rnia
Min
nes
ota
No
rth
Car
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Mai
ne
Wis
con
sin
Haw
aii
Ark
ansa
s
Iow
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Idah
o
Ver
mo
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New
Jer
sey
Sou
th C
aro
lina
States Sorted By Effective Tax Rate
STATES WITH HIGHER MARGINAL TAX RATES & HIGHER EFFECTIVE RATESRelative to South Carolina
Highest Tax Rate Effective Tax Rate
18Source: Tax rate and brackets for each state were obtained from 2012 state tax forms. Data compiled by the S.C. Revenue and Fiscal Affairs Office. GOS/09/09/16
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%M
aryl
and
Ken
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Del
awar
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Co
nn
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Wes
t V
irgi
nia
Mas
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Oh
io
Ind
ian
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Pen
nsy
lvan
ia
Illin
ois
Vir
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ia
Mis
sou
ri
Kan
sas
Uta
h
Mo
nta
na
Rh
od
e Is
lan
d
Neb
rask
a
Geo
rgia
Sou
th C
aro
lina
States Sorted By Effective Tax Rate
STATES WITH LOWER MARGINAL TAX RATES & HIGHER EFFECTIVE RATESRelative to South Carolina
Highest Tax Rate Effective Tax Rate
19Source: Tax rate and brackets for each state were obtained from 2012 state tax forms. Data compiled by the S.C. Revenue and Fiscal Affairs Office. GOS/09/09/16
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%So
uth
Car
olin
a
Ala
bam
a
Okl
aho
ma
Co
lora
do
Mic
hig
an
Mis
siss
ipp
i
New
Mex
ico
Lou
isia
na
Ari
zon
a
No
rth
Dak
ota
States Sorted By Effective Tax Rate
STATES WITH LOWER MARGINAL TAX RATES & LOWER EFFECTIVE RATESRelative to South Carolina
Highest Tax Rate Effective Tax Rate
20Source: Tax rate and brackets for each state were obtained from 2012 state tax forms. Data compiled by the S.C. Revenue and Fiscal Affairs Office. GOS/09/09/16
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
Massachusetts Indiana Pennsylvania Illinois Utah South Carolina Colorado Michigan
States Sorted By Effective Tax Rate
STATES WITH A FLAT INCOME TAX RATECompared to South Carolina’s Marginal and Effective Tax Rates
Highest Tax Rate Effective Tax Rate
QUESTIONS
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