A Comparison of State Withholdings

When you receive your paycheck, do you ever look at the state income tax withholding and think about relocating? I think all of us, unless we're lucky enough to live in a state with no income tax (AK, FL, NV, NH, SD, TN, TX, WA, WY) do that at one time or another. But where do we go? We decided to do a quick state income tax comparison by calculating annual withholding amounts for two "typical" employees. We realize that by comparing withholding amounts, rather than actual, calculated income tax liabilities, we are only estimating ranking among states but thought the resulting approximation would provide us some food for thought in our relocation consideration.

We first defined our "typical" employees:

(1) Ms. Red is single, has no dependents, claims 1 exemption, does not itemize deductions, and makes $24,000 per year.

(2) Mr. Green is married (and his wife has no income), has two kids, claims 4 exemptions and makes $60,000 per year. We do not account for any local taxes such as those required in Pennsylvania and Ohio.  No disability withholding is taken into consideration either.  Examples of this are California, New York and Hawaii. For the example, we visited Paycheck City and set up our two employees in the "Paycheck Calculator". Finally, we ran a payroll for each employee for each state and tabulated the results (shown below).

Tax year 2008 comparison
State	Ms. Red:  Single-1	Mr. Green: Married- 4	State
Oregon	1421	3618	Wisconsin
Hawaii	1279	3552	Oregon
Idaho	1208	3324	North Carolina
Wisconsin	1200	3310	Arkansas
North Carolina	1168	3303	Hawaii
Utah	1075	3171	Washington DC
Kentucky	1066	3094	Kentucky
South Carolina	1051	3074	South Carolina
Minnesota	992	2944	Iowa
Washington DC	980	2927	New York
Georgia	950	2806	Virginia
Massachusetts	941	2722	Montana
Maine	935	2682	Massachusetts
Mississippi	935	2620	Mississippi
Montana	904	2589	Idaho
Virginia	897	2500	Utah
Maryland	893	2476	Georgia
Michigan	892	2295	West Virginia
Arkansas	880	2293	Oklahoma
Colorado	861	2286	Maine
Oklahoma	854	2236	Nebraska
Iowa	843	2224	Alabama
Alabama	830	2180	Minnesota
Indiana	782	2147	Maryland
West Virginia	780	2142	Delaware
Kansas	759	2138	Missouri
Nebraska	756	2028	Ohio
New York	738	2001	Michigan
Pennsylvania	737	1988	Kansas
Missouri	678	1842	Pennsylvania
Delaware	670	1802	Indiana
Rhode Island	669	1800	Connecticut
Illinois	660	1796	Colorado
Vermont	643	1637	Louisiana
New Mexico	634	1560	Illinois
Arizona	573	1501	New Mexico
Louisiana	565	1483	Rhode Island
Ohio	538	1368	Vermont
New Jersey	360	1231	Arizona
North Dakota	353	1062	New Jersey
California	333	996	California
Connecticut	298	777	North Dakota

Again, because our comparison is based upon withholdings (which may or may not take into account excess itemized deduction amounts) and not actual liabilities, take the results with a grain of salt. But the next time you think of relocating, you might have some idea where to start!

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