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CCH can assist you with stories, including interviews with CCH subject experts. Also, the 2012
CCH Whole Ball of Tax
is available in print. Please contact:
 
Leslie Bonacum
(847) 267-7153
mediahelp@cch.com
 
Eric Scott
(847) 267-2179
eric.scott@wolterskluwer.com

Visit the CCH Whole Ball of Tax site often as new releases and other updates will be posted throughout the tax season.

CCH provides special CCH Tax Briefings on key topics at CCHGroup.com/Legislation.

 
2012 CCH Whole Ball of Tax
Release (18) | Back to WBOT

2012 CCH Whole Ball of Tax

Contact:
Leslie Bonacum
, 847-267-7153, mediahelp@cch.com
Eric Scott, 847-267-2179, eric.scott@wolterskluwer.com

Millionaire Tax Much Discussed By Cash-strapped States, But Adoption Is Limited; Tax Rates Trending Downward, CCH Finds

Amnesty Programs Continue as States Try to Bring in More Revenue  

(RIVERWOODS, ILL., January 2012) – While most states are cash-strapped, they also are reluctant to raise state income tax rates across the board – and in fact, some are lowering their rates, according to CCH, a Wolters Kluwer business and a leading provider of tax, accounting and audit information, software and services (CCHGroup.com).

“In the past few years, there has been a lot of activity, and even more rhetoric, about raising income taxes, particularly for high-income earners,” said CCH State Tax Analyst Kathleen Thies, JD. “However, it’s often difficult to raise taxes, so even for some that did, they only did so for a limited time and those increases are now phasing out.”

State Income Tax Adjustments

Over the year, most state’s marginal income taxes remained steady. Connecticut was one of the few states to significantly increase its income tax rate, from 6.5 percent to 6.7 percent, with the 6.7-percent rate applied only to income above $500,000 for joint filers and $250,000 for single filers in 2011. However, several other states saw a decrease in their income tax rates in 2011 or planned in 2012. These include:

  • California phased out an added 0.25 percent to each income tax bracket that had been in effect for 2009 through 2010;
  • Delaware lowered its top marginal tax rate from 6.95 percent in 2011 to 6.75 percent for 2012 (further decrease to 5.95 percent on taxable income of more than $60,000 for tax years beginning after 2013);
  • Massachusetts lowered its rate on Part B income from 5.3 percent to 5.25 percent in 2012;
  • North Carolina phased out the 2-3 percent surtax charged to certain taxpayers in 2011, leaving its top tax rate at 7.75 percent;
  • North Dakota dropped its top rate from 4.86 percent to 3.99 percent in 2012;
  • Ohio ’s top rate dropped from 6.24 percent to 5.925 percent in 2011; and
  • Oklahoma ’s top rate dropped from 5.5 percent in 2011 to 5.25 percent in 2012.

High income earners in most states saw their state tax obligations decline, as state’s temporary taxes on these individuals came to an end in 2011 or are expected to phase out in the next year or two. Among state income tax changes affecting those with income of more than $500,000 in 2011:

  • California, which tacks 1 percent onto its highest income tax rate of 9.3 percent for taxpayers with income of more than $1 million, for a 9.3-percent tax rate. This is down from 2010 when the millionaire tax was 1 percent onto its highest income tax rate of 9.5 percent;
  • Connecticut, which assesses an income tax of 6.7 percent on income in excess of $500,000 for joint filers ($250,000 for single filers). Prior to 2011, Connecticut had applied a 6.7-percent tax rate on income of more than $1 million for joint filers ($500,000 for single filers), so the new higher rate applies more broadly;
  • Maryland, which phased out its 6.25-percent tax rate on income of more than $1 million after 2010, still applies a 5.5-percent tax rate to income above $500,000;
  • New Jersey , which imposes an 8.97-percent income tax on income of more than $500,000;
  • New York , which imposes an 8.97-percent income tax on income of more than $500,000 (through 2011); and
  • Oregon , which imposes an 11-percent income tax on income of more than $500,000 (through 2012 only).

Additionally, some states are introducing new tax rates for high-income tax earners well below the $500,000 mark. For example, the District of Columbia will be applying a new 8.95-percent tax rate on income above $350,000 in 2012 (current top marginal rate is 8.5 percent).

As is evident, state income tax rates continue to run the gamut. Seven states impose no income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming), and two other states only impose an income tax on dividend and interest income (New Hampshire at 5 percent and Tennessee at 6 percent for 2011).

States imposing the highest income tax rates for 2011 include California (with a maximum marginal state income tax rate of 10.55 percent), District of Columbia (8.5 percent), Hawaii (11 percent), Iowa (8.98 percent), Maine (8.5 percent), New Jersey (8.97 percent), New York (8.97 percent), Oregon (11 percent) and Vermont (8.95 percent).

(See chart below for full detail on State Income Tax Rates.)

Amnesty Programs Continue As States Seek Revenues

In addition to raising income taxes, states also are looking at how to collect taxes owed but not paid. One way states have historically attempted to do this is through state income tax amnesty programs. Typically under these programs, the states will allow taxpayers who come forward to pay their taxes with reduced penalties. The taxes can be income taxes, use taxes or other types of taxes the states may levy.

In addition to the District of Columbia, five states offered limited-time amnesty programs in 2011 for individual taxpayers, down from 10 states in 2010. These states include: Arizona ; California; Colorado; Michigan; and Ohio (October 1, 2011 – May 1, 2013).

However, taxpayers need to consider the ramifications of participating in an amnesty program.

First, they need to determine if they can pay the amount they owe. This includes not only the amount they owe the state but also any additional amount they may owe in federal income taxes and penalties. Penalties owed to the IRS are not reduced under state amnesty programs.

Additionally, taxpayers participating in amnesty programs could increase their likelihood of being audited and could affect their tax liabilities in other states as states do share this information with one another.

“It’s generally a good idea to seek the advice of a tax professional if you’re going to participate in an amnesty program,” said Thies. “There is a considerable amount of paperwork and there are a lot of inter-related issues that need to be worked through.”

About CCH, a Wolters Kluwer business

CCH, a Wolters Kluwer business (CCHGroup.com) is a leading global provider of tax, accounting and audit information, software and services. It has served tax, accounting and business professionals since 1913. CCH is based in Riverwoods, Ill. Follow us now on Twitter @CCHMediaHelp. Wolters Kluwer (www.wolterskluwer.com) is a market-leading global information services company. Wolters Kluwer is headquartered in Alphen aan den Rijn, the Netherlands.

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nb-12-32

State Income Tax Rates

The following chart shows the top marginal state income tax rate, states assessing increased rates on income in excess of $500,000 and flat tax rates used in some states. States shaded indicate they do not have income taxes or their income taxes are limited to dividend and interest income.

State

Top Marginal Income Tax Rate

High Income Earner Tax Rate (rate for income over $500,000)

Flat Tax Rate

Alabama

5%

 

 

Alaska

No income tax

 

 

Arizona

4.54%

 

 

Arkansas

7%*

 

 

California

9.3%*

+1% on income of $1,000,001+

 

Colorado

 

 

4.63%^

Connecticut

6.5%

6.7% on income above $500,001 (joint filers); and $250,001 (single filers)

 

Delaware

6.95% (For 2012, top rate will be 6.75%)

 

 

Dist. of Columbia

8.5% (For 2012, 8.95% on income above $350,000)

 

 

Florida

No income tax

 

 

Georgia

6%

 

 

Hawaii

11%

 

 

Idaho

7.8%*

 

 

Illinois

 

 

5% of federal AGI

Indiana

 

 

3.4% of AGI

Iowa

8.98%*^

 

 

Kansas

6.45%

 

 

Kentucky

6%

 

 

Louisiana

6%

 

 

Maine

8.5%*^

 

 

Maryland

5.25%

5.5% on income above $500,000

 

Massachusetts

 

 

5.3%

Michigan

 

 

4.35%

Minnesota

7.85%*^

 

 

Mississippi

5%

 

 

Missouri

6%

 

 

Montana

6.9%*

 

 

Nebraska

6.684%

 

 

Nevada

No income tax

 

 

New Hampshire

No broad income tax

 

5% on interest / dividend income only

New Jersey

6.37%

8.97% on income of $500,001+

 

New Mexico

4.9%

 

 

New York

7.85%

8.97% on income of $500,001+

 

North Carolina

7.75%*

 

 

North Dakota

3.99%*

 

 

Ohio

5.925%*

 

 

Oklahoma

5.5% (For 2012, top tax rate decreases to 5.25%)

 

 

Oregon

10.8%*

11% on income of $500,001 or more (joint filers); $250,001 or more (single filers)

 

Pennsylvania

 

 

3.07%

Rhode Island

9.9%*

 

6%

South Carolina

7%*

 

 

South Dakota

No income tax

 

 

Tennessee

No broad income tax

 

6% on interest / dividend income only

Texas

No income tax

 

 

Utah

 

 

5%

Vermont

8.95%*

 

Virginia

5.75%

 

 

Washington

No income tax

 

 

West Virginia

6.5%

 

 

Wisconsin

7.75%*

 

 

Wyoming

No income tax

 

 

* Brackets indexed for inflation.

^ Taxpayers subject to state alternative minimum tax.

Illinois has an additional personal property replacement tax of 1.5 percent of net income that is imposed on partnerships, trusts and S Corporations.

Indiana counties may impose an adjusted gross income tax on residents or nonresidents or a county option income tax.

Oregon’s brackets indexed for inflation annually, except for $125,000 or over brackets.

 

SOURCE: CCH, 2012.

Permission for use granted.

 

 

 

       


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