State taxes are enforced contributions levied upon individuals by their state of residence. Except for Alaska, Washington, Nevada, Wyoming, South Dakota, Texas and Florida, every state in the union imposes a state tax in the form of a percentage to a resident’s income. These percentage rates can vary from the highest at 9.5% for Vermont residents to a low of 3% for residents of Illinois. States such as Tennessee and New Hampshire only allow a state tax on interest and dividend income. State taxes are collected annually and are combined with other forms of direct and indirect tax contributions to pay for state facilities, programs and services.
The majority of states apply a tax rate to incomes on a progressive scale. The larger a resident’s income, the more tax they will pay. While a lack of state taxes can sound promising, those not enforcing this type of tax generally obtain their revenues elsewhere, often through sales or excise taxes. Purchasing goods or cigarettes and alcohol tend to be higher in states such as Washington than they are in North Carolina. There is much debate as to the benefits of this type of taxation as it can be a plus or minus for both individuals and businesses. States such as Nevada obtain proceeds by means of their renowned gambling industry.