Average Marginal State Income Tax Rates 1977+

These tables show the average marginal state income tax rate on various types of income over the years 1977 to 2012. Three approaches are taken. In one, actual micro data for each state and year is used, as supplied by the Statistics of Income Division of the IRS. In the second the same nationally representative sample from 1984 is used (properly deflated) for each state and year. This later approach allows for comparisons of law without confusing changes in income and deductions with changes in law. In some regression studies it may be used as an instrument for the actual tax rate that is independent of a state's economic condition. A final pair of tables use the actual distribution of income across states in 1984 for all years.

The calculation accounts for the cross deductibility of state and federal taxes for itemizers in certain states. Notice that in states with no deduction for mortgage interest paid but whose taxes depend in some manner on the federal tax (either directly or because of a deduction for federal taxes) this rate will be non-zero and may be positive or negative. The TAXSIM model used for these computations accounts for all the major and most minor features of the tax code, including minimum and maximum taxes, credits, phaseouts, and itemization status.

The calculation for each cell is done by first finding the sum of the income tax liabilities owed by all the taxpayers in that state for that year. Then we increase the selected income item by 1% for each taxpayer and recalculate the tax. The ratio of the additional tax to the additional income (multiplied by 100) is shown in the tables for 6 types of income. Here we provide the average rate for each dollar of income or deduction, not the avererage rate per taxpayer. Because higher income taxpayers will generally have higher rates, these rates will be higher than taxpayer averages but may be preferred for estimating effects that should add up to national totals.

Using the actual distribution of income by state.

The SOI division does not reveal the state of residence for taxpayers with AGI greater than $200,000 (nominal). We have the number of such taxpayers by state for most years since 1989, and use that information to impute states for high income taxpayers. All pre 1989 imputations use the 1989 distribution of taxpayers across states.

The entries for 1979 through 2008 are based on annual micro-data supplied by the IRS Statistics of Income Division. The entries for 1977, 1978 and 2009+ on are based on our extrapolations from the nearest available micro data. These tables start in 1977 because that is the earliest year for which we have tax calculators.

Users should remember that differences in average marginal rates across states or time may be due to differences in the tax treatment of various types of income, or differences in the distribution of those types of income. That is, one type of income may have a higher average marginal rate if it is received chiefly by taxpayers in higher brackets, even if the tax law treats all income types uniformly.

Using the 1984 national distribution across years and states.

Using the 1984 distribution of income across states

These tables use the actual 1984 distribution of income across states, and apply it across all years. In HTLM format:

The table columns are:

  1. State ID
  2. Year
  3. Wages
  4. Interest Received
  5. Dividends Received
  6. Long Term Capital Gains
  7. Mortgage Interest Paid (subsidies shown as negative tax)
  8. Pension income
  9. State Name

The format of the ASCII tables is intended to make it easy for computer programs to read the rather large tables. The state name is left for last in case your software has trouble with embedded blanks. Here is a sample SAS program to read the data (assuming you right click on a table link above and save as ``avrate.txt''.

data; infile 'avrate.txt'; input state year Wages Intrec Divrec LTgain MgtPd Penrec; run; Daniel Feenberg
Last modified 13 April 2016
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