OLR Report 2014-R-0193 answers the question: Did California, the New England states, and New Jersey and New York increase the income tax rates on their highest earners between 2009 and 2014?
Of the nine states in our sample, all but New Hampshire levy broad-based personal income taxes (New Hampshire taxes interest and dividend income at a flat 5% annual rate). Of the remaining eight states, all but Massachusetts levy a progressive income tax, one in which the rate increases with income. (Massachusetts taxes income, regardless of the amount, at a flat annual rate, which for 2014 is 5.2%).
Of the seven states with progressive income taxes, California (2012), Connecticut (2009 and 2011), New Jersey (2009), and New York (2009 and 2012) increased the tax rates on the highest income bracket in 2009-2014. All but Connecticut increased the rates on a temporary basis. California, for example, increased the rates on the highest income brackets for seven years under Proposition 30, a ballot initiative that included other revenue raising measures.
During this period, Maine and Rhode Island made structural changes to their income tax. In 2011, Maine consolidated its four brackets into three and reduced the rate for its top bracket from 8.5% to 7.95%. These changes took effect in 2012. In 2010, Rhode Island consolidated its 20 brackets into three and set the rate for the highest bracket at 5.99%. Vermont reduced its income tax rates in 2011-2012.
A progressive income tax’s brackets and rates tax people based on their ability to pay. But other elements of the tax, such as exemptions and deductions, also affect one’s ability to pay. The Massachusetts Tax Fairness Commission underscored this point in a 2014 report, claiming that the state’s flat income rate tax was progressive “because of a number of exemptions, deductions, and credits for low-income taxpayers, including a provision that exempts very low-income individuals from paying any income tax, a substantial personal exemption available to all taxpayers, and a state-administered Earned Income Tax Credit” (Report of the Tax Fairness Commission, Commonwealth of Massachusetts, March 1, 2014).
For more information, read the full report.
