The Tax Foundation’s Emily Potosky highlights each state’s approach to taxing capital gains. North Carolina has room to improve, especially in the Southeast. It’s lucky for N.C. policymakers that the John Locke Foundation has offered recommendations about how to improve the situation.

From the Tax Foundation:

At the state level, taxes on investment income vary anywhere from 0 to 13.3 percent. Three states (Alabama, Iowa, and Louisiana) allow taxpayers to deduct federal income tax paid from state taxable income, and others states also treat capital gains income in a special manner. All of these special treatments, any additional tax levied at the state or local level, and the effect of the Pease limitation on itemized deductions, are taken into account when calculating states’ top effective marginal rates.

The average rate among all states is 28.2 percent, a small decrease from the prior average of 28.7 percent in 2014. However, taking into account each state’s respective capital gains income, the weighted average rate is 28.9 percent.

Breaking this down further, the states with the highest top marginal capital gains tax rates are California (33 percent), New York (31.6 percent), Oregon (31.2 percent), and Minnesota (30.9 percent).

The lowest rate of 25 percent is shared among the nine states with no personal income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming).

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