4,246 Jurisdictions, One Dataset: What Local Payroll Tax Data Reveals
If you've ever wondered why payroll is more complex than income taxes, here's the answer: 4,246 local jurisdictions across the United States each levy their own payroll or income taxes, with their own rates, their own rules, and their own collection agencies.
We built the PayrollTax API to make this data accessible. In the process, we assembled one of the most comprehensive datasets of US local payroll tax rates available anywhere. This article is a deep dive into what that data actually shows.
Every number in this article comes from live queries against our production database of 4,300+ rate records across 4,246 active jurisdictions.
By the Numbers
Here's the high-level breakdown of what's in the dataset:
| Jurisdiction Type | Count |
|---|---|
| Cities | 3,278 |
| Counties | 200+ |
| School districts | 713 |
| States (+DC) | 51 |
| Federal | 1 |
| Total | 4,246 |
Those 3,278 cities, 200+ counties, and 713 school districts are where the real complexity lives. Every one of them has its own employee-side tax rate — and many have employer-side rates too. When you combine federal income tax, FICA, state income tax, state unemployment, and local taxes, a single employee in the wrong zip code can trigger five or more separate withholding calculations.
Local Tax Jurisdictions by State
The Pennsylvania Problem
Pennsylvania dominates the dataset. Of our 4,246 total jurisdictions, 2,573 are in Pennsylvania — that's 61% of all city/county local tax jurisdictions in the country, concentrated in a single state.
Why? Pennsylvania's borough system. The state is divided into thousands of tiny municipalities — boroughs, townships, and cities — and under Act 32 (enacted in 2012), every one of them can levy an Earned Income Tax (EIT) on residents and workers.
The rates range from 1.0% (the floor for most small townships) to 3.60% (Reading, Berks County — the highest local employee tax rate in our entire dataset). Here's what the top of the list looks like:
| Jurisdiction | Rate |
|---|---|
| Reading, Berks County | 3.60% |
| Philadelphia | 3.45% |
| Scranton, Lackawanna County | 3.40% |
| Wilkes-Barre, Luzerne County | 2.95% |
| Hazleton, Luzerne County | 2.50% |
| Pittston, Luzerne County | 2.50% |
| Harrisburg, Dauphin County | 2.00% |
| Allentown, Lehigh County | 1.96% |
But the sheer volume is the real challenge. The average Pennsylvania EIT rate is just 1.01% — most of those 2,573 municipalities sit at 1.0%. The complexity isn't in the rates themselves; it's in figuring out which municipality an employee lives or works in, looking up the correct PSD (Political Subdivision) code, and routing the withholding to the right tax collector (Berkheimer, Keystone Collections Group, or one of several others).
For payroll software, Pennsylvania alone requires maintaining a mapping of 2,573 jurisdiction codes to tax rates, plus knowing whether the employee is a resident or non-resident of each municipality. Most jurisdictions have different rates for each.
Ohio's Three-System Maze
Ohio is the second-most complex state in our dataset with 527 city-level jurisdictions — but what makes Ohio uniquely challenging isn't the count, it's the fragmentation.
Ohio's municipal income taxes are administered by three separate systems:
- RITA (Regional Income Tax Agency) — serves 350+ municipalities
- CCA (Central Collection Agency, based in Cleveland) — serves ~200 municipalities
- Self-administered — 14 cities handle their own collection
Each system has its own filing portal, its own forms, and its own rules. An employer with workers spread across Ohio might need to file with all three.
The rates vary significantly. Our data shows Ohio local rates ranging from 0.50% to 3.00%:
| Jurisdiction | Rate |
|---|---|
| Parma Heights | 3.00% |
| Bedford | 3.00% |
| Euclid | 2.85% |
| Youngstown | 2.75% |
| Trotwood | 2.75% |
| Warrensville Heights | 2.60% |
| Gahanna | 2.50% |
| Bexley | 2.50% |
Ohio also has a concept that doesn't exist anywhere else: JEDDs (Joint Economic Development Districts) and JEDZs (Joint Economic Development Zones). These are special tax zones created by agreements between municipalities, with their own tax rates. Our dataset includes entries like "Youngstown Girard JEDZ" (2.75%) and "Macedonia Northfield Center JEDD" (2.50%) — jurisdictions that don't appear on any standard map but absolutely apply to workers located within their boundaries.
The average Ohio municipal rate is 1.52% — higher than Pennsylvania's average but applied to far fewer jurisdictions.
The Kentucky Complexity
Kentucky's local tax system is different from both Pennsylvania and Ohio. Instead of municipal income taxes, Kentucky levies Occupational License Taxes (OLT) — and critically, they stack.
Our dataset includes 141 Kentucky jurisdictions: 85 counties and 56 cities. Here's what makes Kentucky uniquely painful for payroll: when an employee works in a Kentucky city, they may owe both the county OLT and the city OLT. The taxes stack on top of each other.
The highest combined rates in Kentucky:
| Jurisdiction | Type | Rate |
|---|---|---|
| Bellevue | City | 2.50% |
| Dayton | City | 2.50% |
| Grant County | County | 2.50% |
| Madisonville | City | 2.50% |
| Southgate | City | 2.50% |
| Covington | City | 2.45% |
| Ashland | City | 2.375% |
| Lexington | City | 2.25% |
An employee working in Covington (Kenton County) would owe Covington's 2.45% city OLT plus Kenton County's OLT — a combined local tax burden that rivals Pennsylvania's highest rates.
Notable Kentucky Rate Changes (2024-2026)
Kentucky has seen more rate volatility than most states in recent years:
- Ashland: 2.00% → 2.375% (a 19% increase)
- Somerset: 0.60% → 1.20% (doubled)
- Bowling Green: 1.85% → 2.00%
- Winchester: 2.00% → 2.15%
- Highland Heights: 1.00% → 1.50% (50% increase)
These changes happen when individual city councils vote to raise rates — often with little advance notice to employers. There is no central notification system.
Rate Distribution: What the "Average" Local Tax Looks Like
One of the most striking findings in our data is how concentrated the rate distribution is:
| Rate Range | Jurisdictions | Share |
|---|---|---|
| Below 0.5% | 1 | 0.03% |
| 0.5% – 1.0% | 50 | 1.5% |
| 1.0% – 1.5% | 2,864 | 85.0% |
| 1.5% – 2.0% | 154 | 4.6% |
| 2.0% – 2.5% | 197 | 5.8% |
| 2.5% and above | 103 | 3.1% |
Rate Distribution Across All Local Jurisdictions
85% of all local payroll tax jurisdictions charge between 1.0% and 1.5%. This is overwhelmingly driven by Pennsylvania, where the standard EIT rate is 1.0% for most municipalities. Remove Pennsylvania from the equation and the distribution would look very different.
State-by-State Average Rates
Maryland has the highest average local tax rate of any state in our dataset — and it's not even close:
| State | Avg Local Rate | Min | Max | Jurisdictions |
|---|---|---|---|---|
| Maryland | 3.03% | 2.25% | 3.30% | 24 |
| Indiana | 1.93% | 0.50% | 3.00% | 92 |
| Ohio | 1.52% | 0.50% | 3.00% | 527 |
| Kentucky | 1.35% | 0.35% | 2.50% | 141 |
| Pennsylvania | 1.01% | 1.00% | 3.60% | 2,561 |
| Michigan | 0.62% | 0.50% | 1.20% | 22 |
| New York | 0.50% | 0.50% | 0.50% | 1 |
Average Local Tax Rate by State
Maryland stands out because its 24 county-level rates are all add-ons to the state income tax. They range from 2.25% (Worcester County) to 3.30% (Caroline County), meaning Maryland employees pay their local tax on top of the state's progressive income tax brackets. It's a different model from Pennsylvania's standalone EIT or Ohio's standalone municipal tax.
Indiana's 92 counties all levy income taxes ranging from 0.50% to 3.00% (Randolph County, the highest). Unlike most states, Indiana county taxes are collected by the state through the normal withholding process — a much simpler model for employers.
The Quiet States: Where There's No Local Income Tax
Only 16 states have local income or payroll taxes. The other 34 states (plus the 9 with no state income tax at all) have zero local income tax complexity. This is worth remembering when people talk about "payroll tax complexity" — the problem is highly concentrated.
The states with local payroll taxes, by jurisdiction count in our database:
- Pennsylvania — 2,573
- Ohio — 527
- Kentucky — 141
- Indiana — 92
- Maryland — 24
- Michigan — 22
- New York — 2
- Others (Alabama, Colorado, Delaware, Iowa, Missouri, Oregon, etc.) — limited local taxes
If your employees are all in Texas, Florida, or California, you have zero local income tax withholding to worry about. If even one employee moves to Pennsylvania, you suddenly need to track 2,573 possible jurisdictions.
What This Means for Payroll Systems
The data tells a clear story: local payroll tax compliance is a long-tail problem. A handful of states account for almost all of the complexity, and within those states, the challenge is less about rates (which are mostly small percentages) and more about jurisdiction identification (which municipality does this address fall in?) and collection routing (which of three Ohio agencies should I file with?).
For payroll software developers, the practical implications are:
1. Pennsylvania and Ohio are table stakes. Together they account for ~3,100 of the city/county local tax jurisdictions in our database. If your payroll software can't handle PA and OH, it can't handle local taxes at all.
2. Kentucky stacking is a common source of errors. County + city OLT stacking means you can't just look up one rate per address. You need to know whether the address falls in a city that levies its own tax, and if so, apply both.
3. Rate changes happen without warning. Kentucky cities raised rates 5+ times in the 2024-2026 period alone. Ohio municipalities can change rates by voter referendum. There's no centralized notification system for most of these changes.
4. The average rate is small but the penalty for getting it wrong is not. At an average of ~1.0%, a local tax error on a $50,000 salary is $500/year. Multiply that across hundreds of employees and the exposure adds up fast — not to mention the penalty and interest from late or incorrect filings.
5. Jurisdiction identification is harder than rate lookup. Once you know which jurisdiction applies, looking up the rate is trivial. The hard part is taking a street address and determining which of Pennsylvania's 2,573 municipalities it falls in — especially when municipality boundaries don't align with zip codes, and borough names repeat across counties.
About the Data
This analysis is based on live data from the PayrollTax API production database. The dataset includes 4,300+ individual tax rate records across 4,246 active jurisdictions, covering federal, state, and local payroll taxes for the 2024-2026 tax years.
All jurisdiction counts and rate statistics were computed from actual database queries, not estimates. The data is sourced from official state and local government publications, including the Pennsylvania DCED, Ohio RITA and CCA, Kentucky Secretary of State, Indiana DOR, Maryland Comptroller, Michigan Treasury, and New York DTF.
We update rates as agencies publish changes. You can query this data directly through our REST API — a free tier with 1,000 requests/month is available, no credit card required.