The state of personal income taxes.

• Author: Rafool, Mandy
• Position: STATESTATS

Whether income taxes should be cut to spur economic growth or readjusted to even out the playing field continues to be the center of tax reform debates. Currently, 43 states levy personal income taxes, although two tax only interest, dividends and capital gains, not wages and salaries. Seven states don't tax income at all and never have, except Alaska, which dropped the tax in 1979. The last state to have adopted a broad-based income tax was Connecticut, in 1991.

In 2011, state personal income taxes generated $259.1 billion, or 34.2 percent of total state tax revenue. For 30 states, the personal income tax generates more revenue than any other tax. And in the 41 states with a broad-based personal income tax, collections per capita in 2010 varied from a high of $1,796 in New York to a low of $379 in Arizona.

Thirty-four states base their tax rates on a graduated scale that increases with income. Hawaii, with 12, uses the most brackets, taxing the lowest income earners at 1.4 percent up to the highest at 11 percent. Eight states use a single, fiat rate, and Massachusetts uses a combination.

Thirty-six states link their tax closely to the federal tax code. Any changes made to the federal code would be felt most immediately and directly by them.

State taxing differences

No personal income tax

Income tax based on some aspect of the federal code

Income tax not based on the federal code

Income tax applies only to interest, dividends and capital gains

Where Does State Tax Revenue Come From? States collected $757.3 billion in...