State individual income tax rates keep dropping
Gov. Huntsman’s proposal to lower individual income tax rates is based on a nationwide trend of the past twenty years. As capital becomes more mobile, interstate and international tax competition plays a greater role in economic development. A competitive tax structure is far more important to Utah’s economic development than subsidizing retail and professional sports stadiums.
The 50-state average top marginal tax rate -- including those states that do not impose individual income taxes -- has decreased by 25% since 1985, from 7.12% in 1985 to 5.34% in 2006.
In 1985, Utah’s top marginal rate was 7.75% which ranked 21st highest in the nation. In 2006, Utah’s top rate is 7.0%, which is 13th highest in the nation.
Rates are falling in western states as well. The average rate – including Nevada, Wyoming, and Washington which do not impose individual income taxes – has decreased from 6.0% in 1985 to 4.9% in 2006. Currently, of ten western states, only California, Oregon, and Idaho have higher individual income tax rates than Utah.
Source: Utah Taxpayers Association using data from CCH State Tax Handbook and the Federation of Tax Administrators