You asked for the personal income tax rates in Connecticut, Massachusetts, New Jersey, New York, and Rhode Island. The tax rate information in this report comes from CCH's State Tax Guide and each state's tax department website.

Of the five states, Connecticut, New Jersey, New York, and Rhode Island have income taxes structured with multiple income brackets taxed at progressively higher marginal rates. Massachusetts is the only one of the five that imposes a flat income tax with two rates (5.3% and 12%) that apply based on the category, rather than the amount, of taxable income. Rhode Island's tax is comparatively flat with only three brackets and a top rate of 5.99% applicable to all taxable income over $125,000.

Of the three states with more progressive rate structures, New Jersey and New York have the highest top rates (8.97%), both applicable to taxable income over $500,000. Connecticut's top rate is 6.87%, applicable to taxable incomes over $500,000 for joint filers, $250,000 for singles and married couples filing separately, and $400,000 for heads of household. As of January 1, 2012, New York is scheduled to drop its two current top brackets and return to its flatter pre-2009 structure with a top rate of 6.85% applicable to taxable income over $40,000 for joint filers, $20,000 for singles and married couples filing separately, and $30,000 for heads of household.

Although Connecticut's new top rate (effective January 1, 2011) is lower than both New Jersey's and New York's current top rates, Connecticut's tax is the only one that phases out its lowest rate for higher-income taxpayers, resulting in more of their income being taxed at an initial marginal rate of 5% rather than 3%. Connecticut also requires taxpayers whose Connecticut adjusted gross income (CT AGI) exceeds certain thresholds to “recapture” or add back to their overall tax liability all or part of the benefits they receive from lower marginal rates on income not subject to the top rate. New York has a similar recapture requirement, but it is temporary and scheduled to end after the 2011 tax year.

Table 1 shows Connecticut's personal income tax rates effective with tax years starting on or after January 1, 2011.

Phase-out of 3% bracket. Connecticut's income tax law phases out the lowest (3%) income tax bracket for taxpayers with higher CT AGI. It does so by gradually expanding the 5% tax bracket and shrinking the 3% one until the latter disappears and all taxable income below the 5.5% threshold is taxed at 5%.

The 3% bracket phase-out threshold is CT AGI over $100,500 for joint filers, $56,500 for singles, $78,500 for heads of household, and $50,250 for married couples filing separately. Taxpayers lose the benefit of the 3% marginal rate entirely if they have CT AGI over $145,500 for joint filers, $101,500 for singles, $114,500 for heads of household, and $72,250 for married couples filing separately. For such taxpayers, the lowest marginal rate is 5%. Table 1A shows the phase-out steps.

TABLE 1A: CT 3% BRACKET PHASE-OUT

Recapture. For taxpayers whose CT AGI exceeds specified thresholds, the law imposes a “recapture” provision to eliminate the benefit they receive from having a portion of their taxable income taxed at lower marginal rates. It does so by requiring taxpayers with higher incomes to add back specified amounts to their tax liability. These “recapture” amounts phase in as CT AGI increases, until 100% of a taxpayer's taxable income is effectively taxed at the highest marginal rate (6.87%).

Taxpayers with CT AGI above the following levels are affected by the recapture provision: $400,000 for married filing jointly, $200,000 for singles and married couples filing separately, and $320,000 for heads of household. Table 1B shows, for each type of filer, the CT AGI starting point for the recapture phase-in, the AGI phase-in intervals and the recapture amount to be added at each interval, and the maximum total recapture amount to be added once CT AGI reaches the fully phased-in level.

TABLE 1B: CT BENEFIT RECAPTURE PHASE-IN

The Massachusetts income tax has two flat rates. The applicable rate depends on the type of taxable income, as shown in Table 2.

New Jersey's income tax rates are shown in Table 3. New Jersey has two sets of tax brackets for two types of filers. Joint filers and heads of household have one more bracket than single filers and married couples filing separately.

New York's income tax rates are currently scheduled to change starting with the 2012 tax year. The state's three-year temporary tax increase on higher-income taxpayers will expire on December 31, 2011. Table 4A shows New York's current income tax rates. Table 4B shows the rates scheduled to go into effect for tax years starting on or after January 1, 2012.

For higher-income taxpayers, New York imposes a recapture provision to eliminate benefits they receive by having part of their taxable income taxed at lower marginal rates. The recapture provision expires after the 2011 tax year. It applies to:

● taxpayers with NY AGI over $300,000 who have NY taxable income taxed at 7.85% (the second-highest rate), and

● all taxpayers with NY AGI over $500,000.

Table 5 shows Rhode Island's income tax rates. Rhode Island's tax has one set of brackets for all filers, regardless of filing status.

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