Taxing States

[braumeister]

This topic comes up often enough, so here's a new summary of most and least taxing states for this year.
Most & Least Taxing States 2014: The United States of Taxation: Where Do You Stand? - Bloomberg

As always, the devil is in the details, and there are plenty of provisions that can change these numbers for many individuals. Still, it can be a useful place to start.

To save time, here are the top and bottom ten lists:

Top Ten High Tax States
1. California 13.3%
2. Hawaii 11%
3. Oregon 9.9% (a, b)
4. Minnesota 9.85%
5. Iowa 8.98% (b)
6. New Jersey 8.97% (a)
7. Vermont 8.95% (tie)
7. Washington, D.C. 8.95% (tie)
9. New York 8.82% (a, c)
10. Maine 7.95%
Notes:
a) Local income taxes are excluded.
b) Allows "some or all federal income tax paid to be deducted from state taxable income," according to the Tax Foundation.
c) The Tax Foundation notes that New York has "'tax benefit recapture, by which many high-income taxpayers pay their top tax rate on all income, not just on amounts above the bracket threshold.”


Top Ten Low Tax States
1. Pennsylvania 3.07%* (a)
2. North Dakota 3.22%
3. Indiana 3.4%* (a)
4. Michigan 4.25%* (a)
5. Arizona 4.54%
6. Colorado 4.63%* ** (d)
7. Kansas 4.8% (a)
8. New Mexico 4.9%
9. Alabama 5% (a, b): tied with Illinois*, Mississippi, New Hampshire* (c) and Utah
Notes:
*flat rate
**of federal adjusted gross income with modifications

a) Local income taxes are excluded.
b) Allows "some or all federal income tax paid to be deducted from state taxable income," according to the Tax Foundation.

c) Tax applies to interest and dividend income only.
(d) of federal taxable income

 

[Independent]

These numbers appear to be the top marginal income tax rates. That leaves a lot of details.

Note, for example, that Iowa allows a deduction for FIT. Someone in a marginal 25% FIT bracket has a marginal Iowa income tax rate of 6.74%, which takes Iowa out of the top ten.

Also, there are a number of states with no individual income tax, seven on this list
State Income Tax Rates - Highest Tax Rates for Each State

 

[pb4uski]

When did Washington, D.C. become a state? I must have been sleeping that day.

 

[mpeirce]

Also consider city income taxes.

I live near Columbus, Ohio and they have a city income tax of 2.5% (levied if you live OR work there). I live in a nearby township that has no local income tax.

Sure there are some benefits to living in a city, but I laugh when the Columbus folks complain that their residential streets aren't snow plowed for days after a snow. My street is always plowed a few hours after a snow.

 

[prototype]

Also consider city income taxes............

+1

I live in Virginia which I think is somewhere in the middle of the pack so to speak. But being in a Northern Virginia, County taxes are a killer. For example I can drive 2 counties and gas out and gas is 30 cents a gallon cheaper, cigarettes are also cheaper, .... all because Virginia (and I imagine other states) allow counties to levy additional taxes to certain items (up to some limit I believe). Real Estate taxes are also much greater, not just due to the higher home values, but much higher county tax rates ( ~35%) than the rural counties. I paid twice as much in county real estate tax on a townhouse assesed at about 375K than I did in state income tax (5.75% for Virginia on everything over ~18K, single) for 2013. Yes there are lots nice libraries and schools (which is now OBE for me with grown kids), etc.

So as I begin my quest/search on where to move, I will be looking at 3 things as far as state taxes go.

1. State tax rate.
2. Local Tax Rates
3. Tax breaks for seniors and retirees (Virginia's IMO are not great)

Here is a link that has basic tax info by State (doesn't really cover much in the way of county/local taxes)

https://www.retirementliving.com/taxes-by-state

 

[meierlde]

+1

I live in Virginia which I think is somewhere in the middle of the pack so to speak. But being in a Northern Virginia, County taxes are a killer. For example I can drive 2 counties and gas out and gas is 30 cents a gallon cheaper, cigarettes are also cheaper, .... all because Virginia (and I imagine other states) allow counties to levy additional taxes to certain items (up to some limit I believe). Real Estate taxes are also much greater, not just due to the higher home values, but much higher county tax rates ( ~35%) than the rural counties. I paid twice as much in county real estate tax on a townhouse assesed at about 375K than I did in state income tax (5.75% for Virginia on everything over ~18K, single) for 2013. Yes there are lots nice libraries and schools (which is now OBE for me with grown kids), etc.

So as I begin my quest/search on where to move, I will be looking at 3 things as far as state taxes go.

1. State tax rate.
2. Local Tax Rates
3. Tax breaks for seniors and retirees (Virginia's IMO are not great)

Here is a link that has basic tax info by State (doesn't really cover much in the way of county/local taxes)

https://www.retirementliving.com/taxes-by-state

It would be interesting to compare the taxes near DC to say Christiansburg or Dublin, Va (towns near Blacksburg) Of course one would expect housing values to be lower so it should be presented both as average taxes paid, and property tax rates.

I guess the real point lies that once one has REed, there is no need to be near a job, so why live in the big metros, move about an hours drive away from the urban limits. In addition to tax costs at least auto insurance should be lower due to less traffic also.

 

[Chuckanut]

When did Washington, D.C. become a state? I must have been sleeping that day.

We are all usually asleep when it comes to the events in Washington D.C.

 

[zedd]

It would be interesting to compare the taxes near DC to say Christiansburg or Dublin, Va (towns near Blacksburg) Of course one would expect housing values to be lower so it should be presented both as average taxes paid, and property tax rates.

I guess the real point lies that once one has REed, there is no need to be near a job, so why live in the big metros, move about an hours drive away from the urban limits. In addition to tax costs at least auto insurance should be lower due to less traffic also.

Actually our auto insurance rates went up after moving from a large metro area to the sticks.

Why? Collisons with deer

 

[2cutebts]

I'm surprised NJ is not #1 on the worst list. Property taxes are out of hand, 7% sales tax, state income tax, and from what I see we are one of only 2 states that charge both an estate tax plus an inheritance tax, which really burns me. I can only see future increases as everyone talks about moving out. Pretty soon the only people left in NJ will be the wealthy and the poor, as the middle class migrates south. Such a shame, as the state itself has alot to offer with location, the shore and beautiful areas north and west, and a climate that is pretty light on natural disasters, as in earthquakes, mudslides, wildfires & tornadoes. Just have to deal with the occasional blizzard or hurricane.

 

[brewer12345]

I'm surprised NJ is not #1 on the worst list. Property taxes are out of hand, 7% sales tax, state income tax, and from what I see we are one of only 2 states that charge both an estate tax plus an inheritance tax, which really burns me. I can only see future increases as everyone talks about moving out. Pretty soon the only people left in NJ will be the wealthy and the poor, as the middle class migrates south. Such a shame, as the state itself has alot to offer with location, the shore and beautiful areas north and west, and a climate that is pretty light on natural disasters, as in earthquakes, mudslides, wildfires & tornadoes. Just have to deal with the occasional blizzard or hurricane.

I boogied on out of there 3 years ago. No regrets.

That said, although I moved from a top 10 state (NJ) to a bottom 10 state (CO), there was relatively little difference in my state income tax bill. For most people, NJ hits you for 6% while CO gets you for almost 5%. The Bloomberg table is clearly for the top marginal rate.

 

[Walt34]

Actually our auto insurance rates went up after moving from a large metro area to the sticks.

Why? Collisons with deer

We had that too, no appreciable reduction in auto insurance, but no big increase either. The other reason given was that WV is not that aggressive about pursuing uninsured drivers. So it's common for someone to pay for a month's insurance, get the car registered, and let the insurance lapse. That means the uninsured motorist coverage is higher than in MD.

 

[meierlde]

We had that too, no appreciable reduction in auto insurance, but no big increase either. The other reason given was that WV is not that aggressive about pursuing uninsured drivers. So it's common for someone to pay for a month's insurance, get the car registered, and let the insurance lapse. That means the uninsured motorist coverage is higher than in MD.

That is why I suggested to cities in the same state, to eliminate the source of the noise. I saw this when I moved to a small town (in a small county in Tx).