Source: NCPA
States with no income tax may compensate for that income loss with higher taxes in other areas, according to a new report by National Center for Policy Analysis Senior Fellow Pam Villarreal.
The seven states that don’t have a state income tax – Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas and Wyoming – may have an advantage over other states, but are vastly different in terms of property and sales taxes when compared to each other, says Villarreal.
“States with no income tax are appealing, but there are significant differences in those seven states when it comes to other tax burdens,” warns Villarreal.
Using the NCPA’s State Tax Calculator to compare tax rates between states with no income tax, Villarreal found:
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A 40-year-old Florida couple earning a combined income of $150,000 a year, with a home value of $200,000 that moved from Florida to Texas would lose more than $2,000 annually in discretionary income, for a total lifetime loss of $181,000.
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An individual who owned a $150,000 home in New Hampshire and purchased the same value home when moving to Alaska would gain an additional $1,233 a year in discretionary income and a lifetime gain of $125,226.
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The 40-year-old Florida home owning couple earning a combined income of $150,000 a year would lose about $235 annually in discretionary income from moving to Nevada, for a lifetime loss of $19,438.
“If no-income tax states spend about the same amount per resident on goods and services as income tax states,” says Villarreal, the states “will compensate by imposing high taxes and additional fees in other areas.”
“Moving to an income tax-free state would likely save you money,” adds Villarreal. “However, you should do your research on the total costs of all taxes. The State Tax Calculator can help.”
Not All Income Tax-Free States Are Alike: http://www.ncpathinktank.org/pub/ba805