Fourteen states now levy flat income tax rates, with more on the way. Here’s what it means for taxpayers.
Flat income tax rates explained: Which states have them?
In 2019, only seven states taxed residents with a single, flat income tax rate. By 2025, that number has doubled, according to the Tax Foundation.
How do flat income tax rates work?
Unlike the federal system, which uses brackets so higher earners pay higher rates, a flat income tax charges everyone the same percentage of their income. Advocates say it simplifies filing and makes states more competitive for workers and businesses.
Critics, including analysts at the Institute on Taxation and Economic Policy (ITEP), argue the wealthy benefit most, while lower-income households see little to no relief.
States adopting flat taxes
As of 2025, 14 states levy a flat income tax:
- Arizona (2.5%)
- Colorado (4.4%)
- Georgia (5.39%)
- Idaho (5.695%)
- Illinois (4.95%)
- Indiana (3%)
- Iowa (3.8%)
- Kentucky (4%)
- Louisiana (3%)
- Michigan (4.25%)
- Mississippi (4.4%)
- North Carolina (4.25%)
- Pennsylvania (3.07%)
- Utah (4.55%)
Two more states are on the way. Ohio will introduce a 2.75% flat rate in 2026, while Kansas has approved a 4% rate contingent on hitting revenue targets, Bankrate reports. Since 2023 alone, six states – Arizona, Georgia, Idaho, Iowa, Louisiana, and Mississippi – have made the switch. Legislatures in Missouri, Oklahoma, and South Carolina have debated following suit.
Who wins from flat tax rates?
Flat income tax rates are often set at or below the lowest previous bracket, which usually lowers bills. But the effect depends on your income. As I mentioned earlier, this impacts households differently, with middle earners likely seeing modest savings, while higher earners often receive much larger cuts. Analysts warn that state budgets can also take a hit, leading to reduced services or higher sales and property taxes.
For now, nearly 40% of states with an income tax either have or soon will have a flat rate. With migration and interstate competition driving the trend, tax experts say the list is likely to keep growing.
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