Richardcyoung.com

The Online Home of Author and Investor, Dick Young

Is Your State a Tax Hell?

By

Are you moving in retirement? If so, look back at this piece I wrote on January 22 of 2016. Don’t move to one of America’s “Tax Hells.” 

BurdensMap-01

Is your state a tax hell? Some states pile on the tax burden, adding double digit percentage demands on top of their residents’ federal tax loads. New York, unsurprisingly, takes the cake with a 12.7% tax burden. Some of the other leading states may surprise you with their heavy toll.

The Tax Foundation writes:

Tax burdens go beyond tax collections. Taxpayers pay state and local taxes to their own state of residence, but also pay taxes to other state and local governments. For instance, when a family takes a vacation to Disney World, it pays a variety of taxes to Florida. The family might encounter taxes on hotel rooms, rental cars, food, and many other things. They pay taxes in Florida, but the actual burden of the tax resides back in their home state such as Indiana. Understanding how states shift taxes across state lines is a valuable component of state tax discussions.

For fiscal year 2012, 9.9 percent of personal income went to state and local tax payments. This is down from 10.1 percent fiscal year 2011. Average income increased at a faster rate than tax collections, driving down state-local tax burdens on average.

New Yorkers faced the highest burden, with 12.7% of income in the state going to state and local taxes. Connecticut (12.6%) and New Jersey (12.2%) followed closely behind. On the other end of the spectrum, Alaska (6.5%), South Dakota (7.1%) and Wyoming (7.1%) had the lowest burdens.

On average, taxpayers pay the most taxes to their own state and local governments. In 2012, 78 percent of taxes collected were paid within the state of residence, up from 73 percent in 2011.

State-local tax burdens are very close to one another and slight changes in taxes or income can translate to seemingly dramatic shifts in rank. For example, Delaware (16th) and Colorado (35th) only differ in burden by just over one percentage point. However, while burdens are clustered in the center of the distribution, states at the top and bottom can have substantially different burden percentages—e.g. New York (12.6%) and Alaska (6.5%).

FLASHBACK VIDEO: Scott Hodge Compares State Tax Burdens

The following two tabs change content below.

E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.
E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.