The US Census Bureau releases total state and local tax collections figures, as well as tax collections broken down by tax type. In addition to individual and corporate income taxes, state and local governments collect sales, property, excise, and other taxes.
The results were surprising.
The one place in America where residents pay the highest amount of State and Local Taxes (SALT), wasn’t a state but rather a district. The District of Columbia’s residents paid a whopping $15,009 in SALT for fiscal 2023.
The five states with the highest per capita tax collections were…
1 – New York $12, 506
2 – North Dakota $9,934
3 – Hawaii $9,758
4 – Connecticut $9,388
5 – New Jersey $9,178
By contrast, the five states with the lowest tax collections per capita were…
1 – Arizona $5,006
2 – South Carolina $4,984
3 – Alabama $4,950
4 – Tennessee $4,912
5 – Mississippi $4,868
Illinois ranked 10th on the overall list at $8,339. Among our neighboring states, Missouri at $5,216 and Kentucky at $5,444 stand out.
Further information can be found at the following web address…
Let me leave you with this…
I receive many questions every year about moving to a lower tax state. Whenever this happens, I ask the client to imagine an oblong balloon.
From left to right on the balloon imagine those positions signifying state income taxes, sales, property, and other taxes on the far right.
Let’s say you’re looking at a no income tax state like Texas. So squeeze the part of the balloon on the left hand side that represents the lack of income taxes in the state and see the other portions of the balloon increase in size.
Would you believe that Texas was 34th on the list at $5,737? Or let’s look at Florida, another no income tax state, that was 44th on the list at $5,141.
My point is a simple one.
Running any state requires a certain amount of money. If they don’t get that cash through income taxes, they’ll get it elsewhere.
They have to. They don’t have a choice. They have bills to pay, and they’ll get that money one way or another.
As a matter of fact, higher income earners actually have an advantage in Illinois vs. some other states that no one seems to consider. Illinois income tax is a flat tax at 4.95%.
How would you like to pay 9.85% on Married Filing Joint (MFJ) Incomes of $338K or more in Minnesota? Or what about paying 7.65% on MFJ Incomes over $431K in Wisconsin?
It’s certainly true that many Midwestern states like Michigan, Indiana, and Ohio have a flat tax system that’s less expensive than ours, but then you have to ask yourself another question…
Is incurring the costs associated with moving really worth a couple of thousand dollars a year? You would lose about 5% of your home’s value at the closing table when it was sold.
And that’s not the only expense to consider.
What I’m trying to say is that the choice to move to another state shouldn’t be solely about saving on taxes. I’m sure you never expected a tax guy to say that, but there it is.
If there are other reasons like family or health issues, saving a couple of thousand dollars on your taxes would simply the cherry on top of the decision. Think about it.
As always, if you’re having problems with your accounting work or your taxes, I’m waiting for your call.
We’re all going to get through this. Let’s get through it together…
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.AccountingSolutionsLtd.com
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