articlesA Comparison of State Withholdings
When you receive your paycheck, do you ever look at the state income tax withholding and think about relocating? I think all of us, unless we're lucky enough to live in a state with no income tax (AK, FL, NV, NH, SD, TN, TX, WA, WY) do that at one time or another. But where do we go?
We decided to do a quick state income tax comparison by calculating annual withholding amounts for two "typical" employees. We realize that by comparing withholding amounts, rather than actual, calculated income tax liabilities, we are only estimating ranking among states but thought the resulting approximation would provide us some food for thought in our relocation consideration.
We first defined our "typical" employees:
(1) Ms. Red is single, has no dependents, claims 1 exemption, does not itemize deductions, and makes $24,000 per year.
(2) Mr. Green is married (and his wife has no income), has two kids, claims 4 exemptions and makes $60,000 per year.
We do not account for any local taxes such as those required in Pennsylvania and Ohio. No disability withholding is taken into consideration either. Examples of this are California, New York and Hawaii.
For the example, we visited Paycheck City and set up our two employees in the "Paycheck Calculator". Finally, we ran a payroll for each employee for each state and tabulated the results (shown below).
Tax year 2011 comparison
| State |
Ms. Red Single- 1 |
Mr. Green Married-4 |
State |
| Oregon | $1,558.00 | $3,571.94 | Wisconsin |
| Hawaii | $1,271.23 | $3,467.00 | Oregon |
| North Carolina | $1,168.00 | $3,324.00 | North Carolina |
| Wisconsin | $1,154.30 | $3,310.00 | Arkansas |
| Idaho | $1,154.00 | $3,271.00 | Hawaii |
| Illinois | $1,100.00 | $3,171.00 | Washington D.C. |
| Kentucky | $1,058.00 | $3,086.00 | Kentucky |
| South Carolina | $1,051.00 | $3,074.00 | South Carolina |
| Utah | $981.00 | $2,958.12 | Iowa |
| Washington D.C. | $980.00 | $2,926.96 | New York |
| Minnesota | $974.00 | $2,806.00 | Virginia |
| Massachusetts | $966.93 | $2,722.00 | Montana |
| Georgia | $950.00 | $2,671.00 | Utah |
| Montana | $904.00 | $2,600.00 | Illinois |
| Maine | $901.00 | $2,476.00 | Georgia |
| Virginia | $896.00 | $2,418.00 | Idaho |
| Maryland | $893.00 | $2,395.00 | Massachusetts |
| Michigan | $883.05 | $2,295.00 | West Virginia |
| Arkansas | $880.00 | $2,282.75 | Alabama |
| Rhode Island | $862.50 | $2,235.00 | Nebraska |
| Alabama | $855.75 | $2,207.00 | Maine |
| Colorado | $843.00 | $2,193.00 | Minnesotta |
| Iowa | $842.40 | $2,147.00 | Maryland |
| Indiana | $782.00 | $2,142.75 | Delaware |
| West Virginia | $780.00 | $2,110.00 | Rhode Island |
| Kansas | $759.00 | $2,001.00 | Oklahoma |
| Nebraska | $756.00 | $1,998.00 | Missouri |
| New York | $738.48 | $1,988.00 | Kansas |
| Pennsylvania | $736.80 | $1,966.20 | Michigan |
| Oklahoma | $714.00 | $1,925.48 | Ohio |
| Delaware | $670.00 | $1,870.00 | Mississippi |
| Arizona | $648.00 | $1,842.00 | Pennsylvania |
| Mississippi | $635.00 | $1,802.00 | Indiana |
| Vermont | $626.00 | $1,800.00 | Connecticut |
| New Mexico | $612.30 | $1,727.00 | Colorado |
| Missouri | $603.00 | $1,620.00 | Arizona |
| Louisiana | $593.50 | $1,606.50 | Louisiana |
| Ohio | $511.04 | $1,503.00 | New Mexico |
| New Jersey | $360.00 | $1,320.00 | Vermont |
| California | $335.67 | $1,199.35 | California |
| North Dakota | $303.00 | $1,062.00 | New Jersey |
| Connecticut | $297.50 | $662.00 | North Dakota |
| Alaska | $0 | $0 | Alaska |
| Florida | $0 | $0 | Florida |
| Nevada | $0 | $0 | Nevada |
| New Hampshire | $0 | $0 |
New Hampshire |
| South Dakota | $0 | $0 | South Dakota |
| Tennessee | $0 | $0 | Tennessee |
| Texas | $0 | $0 | Texas |
| Washington | $0 | $0 | Washington |
| Wyoming | $0 | $0 | Wyoming |
Again, because our comparison is based upon withholdings (which may or may not take into account excess itemized deduction amounts) and not actual liabilities, take the results with a grain of salt. But the next time you think of relocating, you might have some idea where to start!
