Why is NC state income tax so f#@&ing high?

[soupcxan]

Just found out that I'll be working in NC for part of 2005...supposedly the cost of living is lower than my current city in TX, but the state income tax is out of this world: Low bracket - 6.0%; High bracket - 8.25%. AND you don't get to deduct federal income tax paid from your NC return. AND you don't get a break on sales tax, it's about 7%.

http://www.bankrate.com/brm/itax/sta..._home_text.asp

The only states I can see with a similarly redonkulous income tax rate are Minnesota and Oregon.

Can anyone explain why the rates are so high in NC of all places? Are people so desperate to move to NC that they're willing to pay these rates? I would expect high rates in NY and CA...not NC.

There are many states with high income taxes. You're not alone.

HI 8.25
CA 9.3
SC 7.0
DC 9
AK 7
ID 7.8
Iowa 8.98
Maine 8.5
Minn 7.85
Montana 11
New Mex 8.2
Ohio 7.5
Oregon 9

[charlie]

It would be interesting to know if those states with
high income taxes have low property taxes.

Texas has no income tax but the property tax is
relatively high, I think.

Cheers,

Charlie

[BUM]

Charlie,

You touched on "the big secret". It must be a secret because so few people understand it. States have to run (efficiently or otherwise). It takes tax dollars. How they get those dollars is the question. Income, property, sales and other taxes are the most visible. If the state has low or no property tax it likely has a proportionately hi income tax. The fed's belt-tightening is squeezing state budgets. States are reacting every way they can. The taxpayer has only a few choices. Pay the state taxes, modify your tax exposure, or get out. I wonder if many RE's have moved to escape taxes or if taxes was distant consideration after healthcare, weather, family, culture etc.

It would be an interesting topic. I'll start one. "After ER I moved here beacuse..."


North Carolina is a good example. Taxes are going up, up, up. In the 3 years I've been there my taxes and assesments have jumped.

Escaping to a "low tax state" is risky. Especially once we all get there

BUM

[Jarhead*]

It would be interesting to know if those states with
high income taxes have low property taxes.

Texas has no income tax but the property tax is
relatively high, I think.

Cheers,

Charlie

Charlie: This is an interesting topic. Probably very useful if those are two major considerations to somebody trying to decide where to relocate to.

I'll chime in re: Calif. situation.

Calif. state income tax is very punitive for high wage earners. Around $60,000, the 9.3 rate kicks in. (Somebody earning $200,000 a year will be somewhere
in the area of paying $14,000 to the state. Less than $60,000, you would pay 0 to about $l800.00. Hand grenade style figures.
Our property tax figures are very easy to compute.
The taxes are l% of the amount you paid for property.
ie: $400,000 would be $4,000 for property tax.
In the early 80s Calif. passed the Howard Jarvis Prop 13 property tax bill. Prior to that time, your taxes were re-evaluated each year, and a new tax-bill based on current assestments were sent out.
With Prop 13, the max. amount the state can raise your rates is 1% of the old tax bill.
I purchased my house in 1987, the year I retired. I paid $200,000 for the house. My tax bill was $2,000. The property now has a market value of $700,000 to $800,000 and my current tax bill is $2800.00. If I were to sell my property now, the new owner would pay about $8,000 in property taxes.
That's hand-grenade style, Re: taxes in Calif.
Regards, Jarhead

I have no ideas about the NC tax situation but I can comment on Texas. I do not quite agree with Charlie.
Even without a state income tax, I do not find
Texas reat estate taxes all that burdensome.
I have owned real estate in 4 states so have some frame of reference. The income taxes no longer
bother me as my income is so low that they are
insignificant.

John Galt

[Telly]

Hi John,

It depends where you live. My RE taxes are about 2.5% of market valuation. 70% of that (and growing fast) is the local school district tax. If you live in an area where there is a lot of growth, or suddenly have it happen all around you, the school taxes really zoom up. Other than moving to a rural area far from towns, I don't think there is anything I can do about it. Sort of a fixed expense, that keeps increasing every year!

It's been a long time since I paid state taxes, but at my current income level it would be a don't care. Actually not paying any Fed taxes right now, first time in many decades! I know that is going to change in the coming years.

But right now, I'm in the unusual position. A total tax reversal from the working days. Back then, would have liked to try to minimize Fed taxes, and local taxes as a percentage of total taxation was sort of a don't care.

Maybe the North Carolina income tax is high to pay for all the pretty fall colors? They just need to assess a Blue Ridge Trail tax. Tax those motor homes on a per-pound basis!

Like Texas, Florida does not have state income tax but property tax in Florida is half of Texas. Home owner insurance is also much much less expensive which is somewhat surprising considering the possibility of hurricanes. I guess 6% sales tax makes up for the shortfall.

[soupcxan]

To put my griping in perspective, I have gotten used to no state income tax locales like TX and FL. Even the GA state tax that I paid didn't seem so bad compared to the rates in NC. And since I'm a renter, I would much rather push the tax burden on those who own homes.

[Richard_Rosenthal]

I'm always surprised when people move to other states without first understanding the potential added costs involved. And, as pointed out by several commentors, such information is not intuitive. In my case, although MA is a fairly high-tax state, as my retirement income will be mostly pension money, it's money not taxed by this state. Changes the whole calculation.

In most states property taxes are paid to the county, right?
Low income tax states usually make up the difference with a sales tax. That's the way it works in Washington. Here in Hawaii, we have relatively high income (8.25 max), and excise (4%) taxes, and property taxes are very low.

CA's property tax seems very unfair. I'd think it would dampen the state's ability to attract people and businesses.

[windedhare]

Like Texas, Florida does not have state income tax but property tax in Florida is half of Texas. *Home owner insurance is also much much less expensive which is somewhat surprising considering the possibility of hurricanes. I guess 6% sales tax makes up for the shortfall.

I've lived in three of I think five states with no state income tax. TX, FL, NH. I would have a really hard time accepting a state income tax at this stage.

IIRC, in Texas sales tax is relatively high, I think its 7.25 with some counties near at 8%.

[Nords]

Soupcxan, take a look at Scott Burns' "Geezer Magnets" archives and a paper copy of Bloomberg's "Wealth Manager" magazine. Both have recently published more comprehensive reviews of state taxes-- the whole income, property, and sales package.

Here's another thread on the subject-- http://early-retirement.org/cgi-bin/...766663;start=0