🔔 COUNTRY A Pennsylvania VS 🎸 COUNTRY B Tennessee

Pennsylvania charges one of the lowest flat income tax rates in the country at 3.07%, a rate that has held steady since 2004 and applies to nearly all income with no brackets, standard deduction, or personal exemption. Tennessee charges 0% state income tax — the Hall Income Tax on interest and dividends was fully repealed effective January 1, 2021, so Tennessee now levies no personal income tax of any kind. At $100,000 in taxable income, Pennsylvania's flat 3.07% rate produces $3,070 in state income tax; Tennessee charges $0 — a savings of $3,070/year, or $30,700 across a decade. Because Pennsylvania's rate is already low relative to most states, the income tax gap with Tennessee is smaller than comparisons involving higher-tax states like Massachusetts or Maryland — but it's not the whole picture. Philadelphia and many other Pennsylvania municipalities layer on a local earned income or wage tax on top of the state rate: Philadelphia residents pay an additional 3.75% city wage tax (3.44% for nonresidents working in the city), pushing the combined state-and-city rate to 6.82% for Philadelphia residents. Property taxes also favor Tennessee: Pennsylvania's average effective rate is about 1.26%, more than double Tennessee's roughly 0.52%. Tennessee's tradeoff is its sales tax — at 9.61% average combined state-and-local, the highest in the nation — and unlike most no-income-tax states, it also taxes groceries at a reduced 4% state rate.