How 41 States Could Tax Your DOGE Dividend — And Which Offer Relief

Since its establishment in January, the Department of Government Efficiency (DOGE) has reportedly identified $155 billion in potential budget reductions. Trump administration officials floated the idea in February that Americans might receive direct payouts worth approximately $5,000 each, funded by roughly 20% of those identified savings. Whether Congress will authorize these distributions remains uncertain, but tax implications have already become a critical question for potential recipients.

The Tax Treatment Question: It Depends on Classification

The taxation of DOGE dividend checks hinges entirely on how they’re legally classified. If treated as federal tax refunds, they would likely escape both federal and state taxation. However, should they be classified as ordinary dividend income, federal tax consequences would follow, and individual states would levy their own income taxes on the distributions.

States With Higher Tax Burdens on Dividend Income

For residents in high-tax states, receiving a $5,000 payout could mean surrendering a significant portion to state coffers. Oregon stands among the heaviest-taxed states, where ordinary dividend distributions face income tax rates between 6.75% and 9.9%. This means an Oregon resident might owe $338 to $495 in state taxes alone—substantially reducing the benefit of the federal distribution.

Similarly punitive rates exist elsewhere: Hawaii taxes dividends at 1.4% to 11% (plus fees), Maine between 5.8% and 7.15% (with additional charges), and Vermont from 3.35% to 8.75%. New Jersey residents would face graduated rates up to 10.75%, while New York’s rates reach 10.9% on dividend income.

California’s progressive system ranges from 1% to 12.3% depending on total income, potentially taking the largest absolute dollar amount from high-income recipients. Minnesota applies bracket-dependent rates from 5.35% to 9.85%.

Mid-Range Tax States

A substantial middle ground exists where states tax dividend income at moderate levels. Colorado, Georgia, Mississippi, and Utah each impose flat 4.4%, 5.39%, 4.4%, and 4.55% rates respectively. Massachusetts applies a flat 5% tax on dividend income, while North Carolina’s flat rate sits at 4.25%.

States including Arizona (2.5%), Indiana (3%), Kansas (5.2% to 5.58%), and Oklahoma (0.25% to 4.75%) represent lower-to-moderate burden jurisdictions. Pennsylvania’s 3.07% rate also falls into this category.

Graduated tax systems in Wisconsin (3.5% to 7.65%), Montana (4.7% to 5.9%), New Mexico (1.5% to 5.9%), and others create brackets where lower-income recipients might pay minimal amounts while higher earners face steeper bills.

States Offering Tax Advantages

Nine states don’t tax ordinary dividend income at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. For residents of these jurisdictions, the full $5,000 would remain untouched by state taxation.

Louisiana presents a gray area. Its Department of Revenue distinguishes between dividends issued by private entities and those distributed by the U.S. government—the latter potentially exempt from Louisiana income tax. If DOGE checks qualify as government distributions, Louisiana residents would face no state tax. If reclassified as ordinary income, they’d owe 1.85% to 4.25%.

The Complete State-by-State Breakdown

Alabama: 2% to 5% on dividend income Arizona: 2.5% flat rate Arkansas: 2% to 3.9% graduated rates California: 1% to 12.3% progressive taxation Colorado: 4.4% flat rate Connecticut: 2% to 6.99% on dividend distributions Delaware: 3.9% to 6.6% graduated rates Georgia: 5.39% flat rate Hawaii: 1.4% to 11% plus additional fees Idaho: 5.7% flat rate Illinois: 4.95% rate on dividends Indiana: 3% flat rate Iowa: 3.8% on dividend income Kansas: 5.2% to 5.58% graduated system Kentucky: 4% flat rate Maine: 5.8% to 7.15% plus fees Maryland: 4.75% to 5.75% plus additional charges Massachusetts: 5% flat rate Michigan: 4.25% on ordinary dividends Minnesota: 5.35% to 9.85% bracket-dependent Mississippi: 4.4% flat rate Missouri: 3% to 4.7% graduated rates Montana: 4.7% to 5.9% on dividend income Nebraska: 2.46% to 5.2% graduated system New Jersey: 1.4% to 10.75% progressive rates New Mexico: 1.5% to 5.9% on distributions New York: 4% to 10.9% on ordinary dividends North Carolina: 4.25% flat rate North Dakota: 1.95% to 2.5% on dividend income Ohio: 2.75% to 3.5% graduated rates Oklahoma: 0.25% to 4.75% bracket-based Oregon (capital gains consideration): 6.75% to 9.9% on ordinary dividend distributions Pennsylvania: 3.07% on dividend income Rhode Island: 3.75% to 5.99% graduated rates South Carolina: 3% to 6.2% on income above $3,650 Utah: 4.55% on dividend distributions Vermont: 3.35% to 8.75% progressive taxation Virginia: 5% to 5.75% on dividend income West Virginia: 2.22% to 4.82% graduated rates Wisconsin: 3.5% to 7.65% bracket-dependent

What This Means for Recipients

The difference between high-tax and no-tax states could exceed $600 on a single $5,000 payment. A retiree or middle-income earner in Oregon might retain just $3,225 from the distribution after state taxation, while a neighboring Washington resident keeps the full amount. These disparities underscore broader questions about the federal government’s role in direct payments and how state tax systems interact with national fiscal policy.

The actual impact depends on Congressional action to authorize the payments and clarification regarding their precise tax classification—variables that remain unresolved as of this analysis.

Tax rates sourced from TaxFoundation.org and state revenue department records as of April 2024.