Purpose of State Income Tax

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The purpose of state income tax is to provide the state with a revenue stream to use for public education, health and human services, and correctional or rehabilitation services. Discover how state income taxes help to provide people with health insurance with information from an independent CPA in this free video on state income tax.

Part of the Video Series: Tax Help
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Video Transcript

My name is Miranda Chook, a CPA. Now most states impose an income tax. Right now there are 7 do not impose an income tax and 2 more that impose an income tax but only on interest and dividends. But for the rest of you, state income tax is typically your state's largest revenue stream, or one of the largest. Closely followed by your state's sales and use taxes and corporation taxes. Now again, depending on which state you're in, the uses of your income taxes are in general maybe the top 3 might be for public education. Now just K through 12 but also for higher education. It may also go to health and human services and one of the major programs that they administer has to do with providing health insurance to eligible adults which lower incomes such as Medicaid in New York or Medi-Cal in California. And rounding out this top 3 is also correctional and rehabilitation services or jails. So that's the purpose for collecting your income taxes. Now if you want more information about how your state is using your income taxes, take a look at your state's budget summary.

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