The flat tax rate for personal income taxation is a new trend among the states in the USA as it is considered simple to understand and implement. So, starting 1st January 2023 (the tax year 2023 ), more states have joined the bandwagon of flat tax rate instead of the slab tax rate.
Flat tax rate vs. slab tax rates
A flat tax rate is a tax system where the same tax rate is applied to all income levels, regardless of the income earned. In contrast, a slab rate tax system has multiple tax rates applied to different income levels. In a slab rate system (like the federal tax rate )the tax rate increases as the income level increases. The advantage of a flat tax rate is that it is easy to understand and simple to implement. It also ensures that everyone pays the same percentage of their income in taxes, which some people see as fair. However, it can be disadvantageous for lower-income earners, as they may pay a higher proportion of their income in taxes than higher-income earners.
On the other hand, slab rate systems consider different income levels and apply different tax rates, with lower rates for lower incomes and higher rates for higher incomes. This can be advantageous for lower-income earners, who pay a lower percentage of their income in taxes. However, slab rate systems can be complicated, and taxpayers may have difficulty understanding their tax liabilities.
List of states that have a flat tax rate from 2023
Here is the list of Eleven states in the USA that have the income tax single rate for the 2023 tax year (the taxes you file in 2024)
Arizona’s Income Tax Rate for 2023 is 2.5%.
Arizona uses the same standard deduction amounts the Internal Revenue Service (IRS) lays out for federal income taxes. Arizona has no personal exemption, and the state does not tax Social Security benefits. Have you tested the 2023 Arizona tax calculator?
Colorado’s Income Tax Rate for 2023 is 4.63%.
Colorado uses the same personal exemption, and standard deduction amounts that the Internal Revenue Service (IRS) lays out for federal income taxes. There are no personal exemptions in Colorado.
Idaho’s Income Tax Rate for 2023 is 5.8%.
Idaho uses the same personal exemption and standard deduction amounts that the Internal Revenue Service (IRS) lays out for federal income taxes.
Illinois Income Tax Rate for 2023 is 4.95%.
Colorado uses the same personal exemption, and standard deduction amounts that the Internal Revenue Service (IRS) lays out for federal income taxes. There is no state standard deduction in Illinois.
Indiana’s Income Tax Rate for 2023 is 3.15% .
Personal exemptions are $1,000 if you’re a single taxpayer, up to $2,500 for each dependent, and $2,000 for married couples who file jointly.1 There is no state standard deduction in Indiana.
Kentucky’s Income Tax Rate for 2023 is 4.5%.
The standard deduction for single individuals is $2,980; for married filing jointly, it is $5,960, and there are no personal exemptions.
Massachusetts Income Tax Rate for 2023 is 5.0%.
There is no standard deduction, but personal exemptions are generous in Massachusetts at $4,400 for single taxpayers and $8,800 for married taxpayers filing joint returns. There is also a $1,000 exemption for dependents. Test the Massachusetts Tax calculator for 2023.
Michigan’s Income Tax Rate for 2023 is 4.25%.
Michigan has no standard deduction, but personal exemptions are $5,000 for single taxpayers and dependents and $10,000 for married taxpayers who file jointly.7
North Carolina Income Tax Rate for 2023 is 4.75%
There is no personal exemption. However, the state standard deduction for a single taxpayer is $10,750, and for a joint return, $21,500.
Pennsylvania Income Tax Rate for 2023 is 3.07%
This rate is the lowest among flat tax states in the U.S. Pennsylvania has neither personal exemptions nor standard deductions for individuals or dependents.
Utah’s Income Tax Rate for 2023 is 4.85%
Although Utah does not technically have a standard deduction, it provides a nonrefundable tax credit equal to 6% of the federal standard deduction.
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