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A Fun State Tax Quiz. Go Figure…

A quiz to celebrate April tax month!

With this year’s April tax deadline right around the corner, here’s a fun quiz that explores how states tax their citizens. So you think it’s rough in your state? Try answering the following questions:

Match the state with the unique tax position they either have now or have had in the past:

Tax positions
1. Taxes a pumpkin if purchased to carve, but won’t tax a pumpkin if purchased to eat
2. Taxes fresh fruit purchased from a vending machine, but not fruit bought at a retailer
3. Allows a $50 deduction for a dead deer donation to the poor
4. Permits an anonymous tax on illegal substances sold
5. Will tax disposable diapers, but not cloth diapers
6. Will tax hiking boots, but not cowboy boots

A. Wisconsin
B. South Carolina
C. Tennessee
D. Texas
E. Iowa/Pennsylvania/New Jersey
F. California

Answers: 1-E, 2-F, 3-B, 4-C, 5-A, 6-D.

Can you name nine states that don’t impose an individual income tax?

Alaska, Florida, Texas, Tennessee, New Hampshire, Wyoming, South Dakota, Washington, and Nevada. But even here there are exceptions, as New Hampshire and Tennessee tax dividend and interest income.

Can you name the seven states with the highest marginal state individual income tax rates in 2022?

Answer: Here they are ranked from highest to lowest: #1 California (13.3%); #2 Hawaii (11%); #3 New Jersey (10.75%); #4 Oregon (9.9%); #5 Minnesota (9.85%); #6 New York (8.82%); #7 Vermont (8.75%). And as a bit of irony, the state of Minnesota now reports a revenue SURPLUS of over $9 billion!

Want the best of both worlds? If you live in this state near the border of this neighboring state, you can manage no individual income tax and no sales taxes. Can you name the two states?

A: South Dakota and North Dakota
B. New Hampshire and Vermont
C. Washington and Oregon
D. Nevada and Arizona
E. Tennessee and Kentucky

Answer:  Live in Washington state and buy your goods in Oregon. Washington has no state income tax and Oregon has no sales tax. Even better, Alaska has neither an income tax or general sales tax.

Which state has a hidden alcohol tax?

A. Pennsylvania
B. New York
C. New Jersey
D. Maryland

Answer: Pennsylvania. In the 1800s, a flood killed nearly 2,000 citizens in Johnstown, PA. In the 1930s, another flood caused extensive damage in the same area. To help rebuild the areas affected by the flood, Pennsylvania imposed a 10% tax on alcohol. By the 1940s, the alcohol tax had helped the Johnstown area to fully recover. The tax was supposed to be temporary. Temporary? Maybe not, as the tax is still around today at 18%. By the way, it’s called a hidden tax because it doesn’t show up on receipts like sales tax does.

Which state provides a tax break for centenarians?

A. Alaska
B. New Mexico
C. Maine
D. Florida

Answer: B – New Mexico. It pays to be a centenarian in New Mexico! Since 2002, anyone who reaches 100 years of age is exempt from personal income tax in New Mexico if that person is not claimed as a dependent by another taxpayer.

The moral of the story? Logic does not drive tax laws…legislatures do!