What are State Income Taxes? Unless you live in Alaska, Florida,
Nevada, South Dakota, Texas, Washington or Wyoming, chances are
you are aware of state income taxes. Much like how the federal
government collects a federal income tax on your wages and other
income, local and state governments levy a similar, though
smaller, state income tax on your wages and other income. Those
who happen to live in Alaska, Florida, Nevada, South Dakota,
Texas, Washington and Wyoming are lucky because those states
don’t have an income tax. New Hampshire and Tennessee only levy
an tax on dividend and interest income. In many states, the
income tax works just like at the federal level with different
tiers and different marginal rates. Only seven states levy a
flat rate (Colorado, Illinois, Indiana, Massachusetts, Michigan,
Pennsylvania, Utah), most prefer a graduated scale. In my home
state of Maryland, the tiers are (for single filers): - 2.00%
for $0 to $1,000 - 3.00% for $1,000 to $2,000 - 4.00% for $2,000
to $3,000 - 4.75% f