If you are sick and tired of looking at your tax form and crying about the federal income tax you paid, it probably adds salt to your wounds when you look at the state portion of the taxes that you pay. You’re basically getting taxed every which way.
In fact, no less of a celebrity than Whoopi Goldberg said, “When living in New York, you’re basically getting taxed going out, coming back in, going forward, going backward.” You can sense the desperation in her voice.
And she actually has a major point to make. Depending on where you live in the United States, the federal income tax is actually the least of your worries. While there has been moves under the Trump presidency to roll back federal income tax, unfortunately, that’s not the only tax you pay.
If you live in a high tax jurisdiction like New York city, you are in a sad state. Especially if you make a lot of money. Not only do you have to pay federal income tax, but you also have to pay state income tax and county taxes and fees and other things that are disguised as non taxes but actually work as taxes.
At the end of the day, the typical high income New York city resident basically has to pay over 50% of their income. If this sounds like something that happens in Scandinavia and Sweden, you have another thing coming because if you are a middle income person, the argument could be made that life is actually better in those countries than in the United States as far as your tax responsibilities go.
Given the fact that there are an increasing number of jurisdictions like New York city, more and more people are looking for a list of states with no income tax. Can you imagine that? This list of states with no income tax involves states that have completely waived their right to impose an income tax on your earnings.
Depending on your income, this can translate to tens of thousands if not hundreds of thousands of extra dollars every single year. It is all not a surprise that a lot of the states in the list of states with no income tax tend to have more robust economies compared to high tax states.
In fact if you look at the exodus of people leaving certain states, New Jersey and New York always top the list. It doesn’t take a rocket scientist or a brain surgeon to figure out why these people are leaving. Unfortunately, the people leaving are the types of residents you don’t want to leave.
These are people who own businesses. These are people who are highly skilled. They have advanced degrees. In other words, they have so much to offer to the rest of society. But unfortunately, the high tax regimen and policies of these jurisdictions leave them with very few options.
So if you’re one of those people or if you’re just starting out and you want to start out right in a state that has no income tax, you might want to consider this list of states with no income tax. The states are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.
Now, here’s a little bit of a caveat. It’s really easy to get excited about the fact that these states have absolutely no state income tax. But don’t let that fool you. Remember, states still have to have police. States still have to make sure that the roads are paved. States still have state responsibilities.
Now, if you’re going on an interstate highway, that’s the federal government funding that highway. But what about state roads? What about those little known roads that go from county to county? This is why these places tend to have sales taxes or other revenue generating systems.
Don’t think for a second that once you go to Alaska, Florida, Nevada, South Dakota, Wyoming, Texas or Washington that somehow, someway, you’re living a tax free fantasy land. It doesn’t work that way. You are still going to pay one way or the other.
Remember: states still have to pay for their welfare schemes, their infrastructure, as well as their state-based programs. It would be tempting to think that when it comes to the ‘big stuff,’ the federal government is paying the bill. Think again.
While the federal government does take the lion’s share of media attention when it comes to government coverage, there’s a lot going on at the state level. Unfortunately, whenever lawmakers think the state is ‘responsible’ for something (instead of people being responsible for themselves) you, the taxpayer, is on the hook. It is so predictable.
Since state legislators, like their federal counterparts, are usually quite generous and charitable with money they don’t own, states have all sorts of programs that need in-state funding. Where do you think tax-free states get the funding for these?
First, look at property taxes. Many states that don’t have income tax get the tax revenues they need for state programs from taxing the value of your home. If you have a home that’s worth a million dollars, don’t be surprised if you have to pony up as much as $30,000 in state property tax year after year.
Next, if you’re lucky enough to live in a state that doesn’t jack its residents up with ridiculous property taxes, you may not yet be off the hook because your state may charge outrageous sales taxes on in-state commerce.
But in the big scheme of things, you don’t have to worry about state income tax. However, certain states have charged such high property taxes that it kinda evens out. So do yourself a big favor. Research the total tax burden you are going to assume before rushing into any of these states with no income tax.
You might be in for a shock. In fact, the numbers may be so big that it would probably be a better idea to stay put where you are.