AbstractThis article examines the economics of the personal income tax (PIT), which is the second largest source of state and local government own-source revenues, after the property tax. When viewed from the state perspective (91 percent of PIT collections are made by states), the PIT is the largest source of own-source revenue, surpassing the general sales tax (26 percent for PIT versus 23 percent for general sales tax). Because policymakers make tax choices given their own economic, demographic, and institutional circumstances, there is wide diversity in its use: forty-one states and the District of Columbia tax a broad base of wage and capital income, while two other states tax only interest and dividend income. The seven states that do not levy a state personal income tax typically have an especially large capacity to tax alternative bases, such as consumption or the extractive industries. Following a state-by-state description of key statutory provisions, the article evaluates how the PIT performs when judged against the criteria of revenue elasticity, equity, efficiency, and administration.