Flat Tax vs Progressive Tax States — Which System Is Better?
The US has two state tax systems: flat and progressive. Flat tax states charge everyone the same percentage regardless of income. Progressive states tax higher earners at higher rates through graduated brackets. Which system saves you more money depends entirely on how much you earn.
See your exact tax under either system with the State Income Tax Calculator.
How the Two Systems Work
| Feature | Flat Tax | Progressive Tax |
|---|---|---|
| Rate structure | One rate for all income | Multiple brackets, rising with income |
| Simplicity | Very simple | More complex |
| Who pays more? | Effective rate is equal for all | Higher earners pay higher effective rates |
| Who benefits? | Higher earners (same rate as everyone) | Lower earners (taxed at lower rates) |
| Number of states | 13 (2026) | 28 states + DC |
Flat Tax States (2026)
| State | Flat Rate |
|---|---|
| Arizona | 2.5% |
| Colorado | 4.4% |
| Georgia | 5.39% |
| Idaho | 5.695% |
| Illinois | 4.95% |
| Indiana | 3.05% |
| Kentucky | 4.0% |
| Michigan | 4.25% |
| Mississippi | 4.7% |
| North Carolina | 4.5% |
| Pennsylvania | 3.07% |
| Utah | 4.65% |
The trend is toward flat: several states have recently converted from progressive to flat systems (Georgia, Mississippi, Idaho), and others are reducing their flat rate annually (North Carolina, Indiana, Mississippi).
Progressive States: Highest Bracket Examples
| State | Lowest Rate | Highest Rate | Top Bracket Starts At |
|---|---|---|---|
| California | 1.0% | 13.3% | $1,000,000 |
| Hawaii | 1.4% | 11.0% | $200,000 |
| New Jersey | 1.4% | 10.75% | $1,000,000 |
| Oregon | 4.75% | 9.9% | $125,000 |
| Minnesota | 5.35% | 9.85% | $193,240 |
| New York | 4.0% | 10.9% | $25,000,000 |
| Iowa | 4.4% | 5.7% | $82,170 |
Tax on $75,000 Income: Flat vs Progressive
| State | System | Tax on $75K | Effective Rate |
|---|---|---|---|
| Illinois | Flat 4.95% | $3,713 | 4.95% |
| Pennsylvania | Flat 3.07% | $2,303 | 3.07% |
| California | Progressive | ~$2,600 | ~3.5% |
| New York | Progressive | ~$3,800 | ~5.1% |
| Oregon | Progressive | ~$5,600 | ~7.5% |
At $75,000, California's progressive system actually produces a lower effective rate than Illinois's flat rate — because most of the income is taxed at 1–4% brackets. Oregon's high brackets kick in early, making it expensive at middle incomes.
Tax on $250,000 Income: Flat vs Progressive
| State | System | Tax on $250K | Effective Rate |
|---|---|---|---|
| Illinois | Flat 4.95% | $12,375 | 4.95% |
| Pennsylvania | Flat 3.07% | $7,675 | 3.07% |
| California | Progressive | ~$17,500 | ~7.0% |
| New York | Progressive | ~$16,000 | ~6.4% |
| Oregon | Progressive | ~$22,000 | ~8.8% |
At higher incomes, progressive states' top brackets produce significantly higher effective rates. This is why high earners often prefer flat-tax or no-tax states.
For all 50 state rates, see State Income Tax Rates 2026. For moving considerations, read State Tax After Moving. And for the no-tax alternative, check States With No Income Tax.
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