States Without An Income Tax

This time of year, I always get a few questions about the nine states that currently don’t have an income tax. Those states include Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Please realize that wherever you move inside the 50 states, you’ll always pay a federal income tax. That’s a given. There’s no getting around it.

At first blush, a person might immediately say there’s no reason to live in a state that does impose an income tax, but I would think twice if I were you. It takes a certain amount of money to run any state.

If they don’t get you one way, they’ll always find another.

I have a perspective that many in my profession don’t enjoy, because of my federal license. 40% of my practice is outside the State of Illinois.

Generally states without an income tax impose other taxes that are higher to get the revenues they need. Just because a state doesn’t have an income tax doesn’t mean that it somehow has less monetary needs or is that much more frugal.

In those untaxed states, anything you can imagine is taxed. Sadly, most of those revenue streams are considered primarily middle and lower class obligations like gasoline taxes or vehicle sticker fees.

These are used because it’s a tax on everyone, rather than just the 60% of us who pay income taxes. Also, the revenue streams are much more reliable. No matter what the economy does, these taxes will always come in.

The other issue is a lack of money for infrastructure improvements. If you think we have problems with roads and bridges, move to upstate Florida.

I’m going to suggest in a loud and clear voice that you think twice before moving, if the main impetus is simply to lower your tax burdens. You’ll probably end up being unpleasantly surprised.

If, on the other hand, the reason is weather or family related, it’s a different story altogether.

Let me leave you with this.

If one were going to move for strictly tax-related reasons, the place to go is certainly Puerto Rico.

There’s no federal income tax on PR derived income, and their state taxes are incredibly low. Qualified residents aren’t even required to file a federal 1040.

That being said, the island has substantial difficulties in other areas. It’s already defaulted on its debt and is in the middle of trying to file a bankruptcy to get out of repaying what’s left from the last hurricane and earthquake.

Medical facilities on the island are completely sub-standard, which is why it isn’t a haven for retirees. Many of its retired residents move to the mainland, in order to get reasonable care.

Income taxes are a hard pill to swallow. No one likes them less than me, but the lesson is that you get what you pay for.

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 Employee Retention Credits, PPP Loan Forgiveness, Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,

Sincerely yours,

Chris Amundson
Accounting Solutions Ltd.

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