Here is a look at the five states with the highest personal income tax levels for middle class wage earners, as well as commentary from economic experts as to what it means to live there.

5. Hawaii

Middle class income tax: 8.25%

Credit unions: 71                      

Total credit union assets: $9 billion-plus

Credit union members: 811,000                  

State population: 1.4 million

There is a price for living in paradise, and it comes in the form of an 8.25% personal income tax on Hawaii's middle-class residents. Factors unique to the 50^th state help drive the tax rate, according to Dennis Tanimoto, president/CEO of the Hawaii Credit Union League.

"The primary reason is that Hawaii is one of the few states in which the public education system is state-based rather than city- or county-based," Tanimoto said. "Another reasons is that our so-called 4% sales tax is really a general excise tax for the state, with an additional .5% assessed in Honolulu to finance the construction of a new light rail system."

But Tanimoto admits there's even a little more to it than that: "We're an island economy and the world's most isolated land mass, meaning that everything has to be shipped in. Plus, if the income tax was any lower we might have too great an influx of new residents."

Higher taxes mean less discretionary income and reduced consumer spending, Tanimoto said.  The impact of member income taxes on credit unions is very small, however, since members are very loyal to their institution. Part of that loyalty is driven by the island state's flexibility when it comes to credit union interaction with banks. The league executive sees this as the "aloha spirit" at work.

"The Bank of Hawaii allows our members to conduct credit union business at any of the bank's 70 branches or 400 ATMs located around the state," Tanimoto said.

Participating credit unions must have a contracted agreement with the bank and pay transactional fees for member activity, he explained. But that allows credit union services conducted through the bank to be free for members.

"It's an a la carte approach, with the credit union deciding which services to make available to members," Tanimoto said. "I consider it to be a wholesale rather than retail financial services approach, and credit unions' large liquidity levels makes it good for the banks, too."

A high personal income tax has long been a fact of life in Hawaii, meaning the credit unions have had to make few accommodations to help members cope. In some ways it works to the advantage of credit unions, which, like churches, schools and other nonprofits, pay no real estate taxes on their branches or other properties. However, that situation may change, the league executive said.

"Credit unions' real estate tax exemption was suspended for two years during the recession, but that law has now sunsetted," Tanimoto said. "Hawaii's counties have talked about removing the exemption completely, but no steps have been taken yet."

When asked by lawmakers, Tanimoto remains mute on how Hawaii's tax laws regarding credit unions relate to those other states.

"I don't know and I don't care to know," he said, "but I think we may be the only state that does this."

4. Washington, D.C.

Middle class income tax: 8.5%

Credit unions: 45          

Total credit union assets: $7.8 billion

Credit union members: 350,000      

Total district population: 646,449

Thanks to the D.C. Tax Revision Commission, the District of Columbia's days as part of the top 5 middle-class income "states" will officially end with 2015 district budget.

The commission, created in 2012 by the Council of the District of Columbia, the district's central chief policymaking body, studied the current tax situation for D.C. residents and established a plan to make taxation more equitable in hopes of attracting more middle-income residents in the district. The commission, now disbanded, completed its plan this past May, issuing a report that made numerous recommendations for council enactment.

The commission was no stranger to D.C.'s unique residency challenges. While private employment was growing, offsetting recent losses in federal jobs, residency remained stagnant. Jobholders old and new were choosing to commute from surrounding communities and using district services without paying the taxes necessary to support those services, according to the commission's report.

The committee reviewed D.C.'s tax structure with the goals "to improve the district's tax system and maintain its fiscal integrity," the report said. The council had allocated $18 million to study and revise D.C.'s tax structure, and among the report's recommendation was a reduction in the personal income tax on middle-class residents.

Previously, wage earners who made less than $10,000 paid 4%, those that made between $10,001 and $40,000 paid 6%, those who made between $40,001 and $350,000 per year paid 8.5%, and those who made $350,001 and above paid 8.95%.

Under the new plan, the lower two strata remain the same. The upper strata were readjusted to make tax payments more equitable to income levels, according to the commissions recommendations.

It was recommended that wage earners making $40,001 to $60,000 pay 6.5% and those making $60,001 to $200,000 pay the current 8.5%. Those making more than $200,001 would see their rates drop to 8.75%.

On Oct. 1, the first year of the district's 2015 fiscal year, the D.C. Council announced wide-ranging tax changes for 2015. The changes included a new middle-class rate for those earning incomes between $40,001 and $60,000 of 7%, according to the council's web site.

The drop in D.C.'s middle class tax rate should mean greater spending power for consumers and credit union members.

3. Iowa 

Middle class income tax: 8.98%

Credit unions: 110                    

Total credit union assets: $12.3 billion

Credit union members: 1 million                  

State population: 3.09 million

The first thing to understand about Iowa when it comes to personal income tax is that the state doesn't really belong on the Top 5 list, according to Mike Powers, CFO of the Iowa Credit Union League.

"What's misleading is that Iowa is one of only a handful of states that allows taxpayers to deduct what they pay in federal income tax from their state taxes," Powers said. "Remove that from the equation and we're closer to the middle of the pack."

Iowa's tax rate has been consistent since 1997, which lends economic stability both to the state and its residents, Powers said. Iowa's unemployment rate of just 4.6%, lower than the national average, also helps. The predictability and stability of both the tax rate and the state help residents plan better and remain financially stable.

"Other states have higher volatility in rates," Powers said. "Having the state government on a firm financial footing creates a positive financial environment."

A stable economy has helped drive credit union loan growth rates up over the past 10 years, Powers said.  Iowa has been near the top in loans before, during and after the recession, which also is testimony to the way the industry works in Iowa.

"Iowa credit unions typically have been smaller than the national average," Powers noted. "That has caused them by necessity to be more collaborative than credit unions in a lot of places, and our league affiliation rate has always been close to 100%."

Collaborative efforts broadened this past year in response to the Obama Administration's Affordable Care Act when Iowa credit unions partnered with CoOportunity Health, a Des Moines health care cooperative that provides affordable health insurance options for residents in Iowa and Nebraska.

Participating credit unions serve as a distribution channel for the co-op, receiving a small fee for each family referred to the health care system. But the CFO said the credit unions see this not as a profit generator, but as a critical member service.

"Health care is a significant factor in the economic health of families," Powers said. "Our role is to bring credit unions together with the coop."

Regarding the high tax rate, there is talk of lowering the rate by dropping the federal tax deduction from time to time, but no serious steps are being considered, according to Powers.

"A few folks from the chamber of commerce just would like to change the 'optics' of the rate and get Iowa off the list you're referring to," Powers said.

2. Oregon

Middle class income tax: 9%

Number of credit unions: 66                      

Credit union assets:  $16.8 billion

Credit union members: 1.5 million                

State population: 3.9 million

In Chuck Sheketoff's mind, few states are as forward-thinking about taxes as Oregon, and the current 9% tax on personal income between $8,151 and $125,000 is a misleading statistic when taken at face value.

"No state has a more progressive tax structure," said Sheketoff, executive director for the Oregon Center for Public Policy (OCPP), a Silverton, Ore.- based organization that does in-depth research and analysis on budget, tax, and economic issues. "If you look at all taxes, in no other state do the wealthy pay a greater percentage of income taxes."

In Oregon, the tax rate is tiered to create a more equitable tax burden for consumers at various income levels, Sheketoff said. Consumers pay 5% on the first $3,250 of personal income, then 7% on income levels from $3251 to $8.150. From there, the 9% rate kicks in on income up to $125,000, after which a 9.9% rate applies. No middle-income consumers pay 9% on all their earnings, he explained.

Correspondingly, Oregon has no sales tax and a business tax rate of less than 4%, lower than business taxes paid in any other state, Sheketoff said. By comparison, neighboring state Washington is one of nine states with no personal income tax, but it charges a 6.5% state sales tax that Sheketoff considers regressive due to the burden it places on all state residents and visitors, regardless of income levels.

"Bill Gates does not feel the sales tax, but a lot of other people do," Sheketoff said.

As head of an organization that promotes economic justice, Sheketoff sees credit unions' roles as important in helping consumers better manage their money in the face of rising costs.

The lobbyist has been a member of $1.2 billion Oregon Community Credit Union (formerly U-Lane-O Credit Union), based in Eugene, since moving to Oregon from southern Illinois in August 1985.

"Credit unions shouldn't be worried about household income tax levels, they should be worried about how people can better save and spend," Sheketoff said. "If I was on the credit union board and asked what should we be worried about, I would say income inequality, poverty and a shrinking middle class."

1. California

Middle class tax rate: 9.3%

Credit unions: 377                    

Credit union assets: $147 billion

Credit union members: 9.9 million              

State population: 38.3 million

Everything is bigger in California, including the personal income tax rate. Even though it's one of 50 U.S. states, California boasts the world's 8^th largest economy making its economic engine greater than most countries around the world.  

With a population of 38.3 million, California beats Canada's entire population level of 35.2 million by more than 3 million citizens. California's gross state product of $2.05 trillion also outpaces Canadian GDP, by comparison a mere $1.8 trillion. With those kinds of number, high taxes are inevitable.

"High taxes are a fact of life and that's not going to change," said Dwight Johnston, chief economist with the California and Nevada Credit Union Leagues. "There is very little impact on credit unions because that's always the way its been out here."

The foundations of the current income tax rate, which ratchets as high as 12.3% on incomes of $508,501 or more, were set in 1978 with passage of Proposition 13, which put the brakes on escalating property tax rates. Sales taxes of 9.75% to 10.75% depending on the municipality further augment what has been lost in real estate taxes, Johnston said.

"California, to some degree, also has a strong social services program (which draws on tax dollars)," Johnston said. "But what it really comes down to is the cost of people and employees of the state."

California tops the list when it comes to public sector compensation for teachers, firefighters, police officers, prison guards "and any kind of public employee you can think of," Johnston said. "You also have incredibly generous state pension programs that comprise 20% of the state budget."

According to Gov. Jerry Brown's 2014-15 Budget Summary, California currently has a state operating budget of slightly less than $107 billion. Based on Johnston' assessment, some $215 million will be earmarked for state employee pension funds.

"If California ever gets any meaningful tax relief it will have to come on the pension side," Johnston said, "but there is no appetite to push for that on the part of the Democratic legislature."

Credit unions have helped their members cope with the high tax environment in the past, providing short-term loans to borrowers who need to satisfy tax debt or pay their bills during government shutdowns. The fact that taxes are unlikely to change does not mean that much to those subject to their burden, Johnston said.

"Changing tax rates will obviously have an impact on the economy, but not as much as its proponents or opponents would like to believe," Johnston added. "It's the economy itself, not taxes, that make a difference."