By Jared Walczak, The Tax Foundation
Individual income taxes are the single largest source of state tax revenue in the United States, accounting for 36.5 percent of all state revenue in fiscal year 2013 despite the fact that nine states forego a tax on wage and salary income. Among states (and the District of Columbia) imposing an individual income tax on wage income, the tax accounts for an average of 43.4 percent of all state collections.
Income taxes tend to be less important to local governments overall, accounting for 4.8 percent of local tax collections. Over 91 percent of all state and local income tax revenue flows to state governments. Low collections at the local level is at least partly due, however, to their lesser ubiquity. They represent 13.8 percent of collections in the thirteen states (and the District of Columbia) permitting local income taxes, ranging from de minimus collections in Oregon to 31.7 percent of local revenue in Maryland. Local governments in six states—Indiana, Kentucky, Maryland, New York, Ohio, and Pennsylvania—generate more than 10 percent of their revenue from individual income taxation, as does the District of Columbia.