Federal taxes are what they are no matter where you go in the country. But depending on the state and local municipality you live in, the smaller governments might take as big a bite out of the fruit of your labor as Uncle Sam does. A third to the Federal, a third to the state and local, and the final third for you hardly seems like a fair deal. You work hard, and it’s not right for the state to compel you to provide for another family first, or else; or to support 30 bureaucrats micromanaging your every move.
The Federal battle is the same everywhere. But you can pick your local battle with a wise choice of residence.
One of the handiest comparative resource we’ve seen for state tax comparisons is the Tax Foundation Center for State Tax Policy.
Here’s a couple of maps and charts to check as you do your planning.
State-Local Tax Burdens (2012)
In 2012, Tax Foundation did a ranking of State AND Local tax burdens. Their research sought to clarify the picture by accounting for the difference between legal incidence and economic incidence of a tax. A simple example is the gas tax. Fuel stations bear the legal incidence, but it is passed straight on to consumers, so the consumers bear the economic incidence.
Another factor they included in their consideration is tax exporting. Alaska residents, for example, pay a small proportion of total taxes collected due to the large oil tax charged on out of state businesses. So a straight comparison would make Alaska’s tax burden on residents seem high, when in reality it is pretty low.
Here’s the summary map, but check out the whole article for full details:
At that time, Redoubt states all ranked in the better half of US States to live in. WY did far better than MT or ID, but keep in mind that when you’re picking one over the other there are many other factors to weigh in, like growing climate, water availability, and so on.
Business Tax Climate (2017)
Tax Foundation provides a good comparison of business tax climates. Sadly, no colorful maps for this one. However, the two charts are pretty easy to read. The 2017-only data breaks down the various tax sub-rankings (rank 1 is best, rank 50 is worst). They also give a 2014-2017 total score listing, so you can see which way states are trending.
- ID slipped slightly from spot 19 to spot 20 in 2015, but has held that spot since.
- MT has held steady at rank 6.
- WY has held steady as the number 1 state (best rank) for business taxes.
So if you’re looking to bring along or start that entrepreneurial business idea, the American Redoubt has much to offer in support of that.
Tax Freedom Day (2016)
Tax Freedom Day is a handy thumb-rule to look at overall state tax burdens. The principle is thus: If you paid 100% of your daily income toward your annual tax burden, how many days would you have to work before your debt is settled and you get to keep what you make thereafter?
Most states’ Tax Freedom Day falls sometime in April. In CA, you’d work the whole first 4 months to pay your tax burden. In a few New England states, you’d be working until sometime in May.
The American Redoubt does fairly well, with ID and MT in the better half.
Property Tax (2014)
It is an awesome thing when you own your land free and clear, and have no mortgage or rent payment to make. Just think of your current budget. If you pay rent or mortgage today, how much more could you do on your current income if that bill were eliminated?
Sadly, even when you do own free and clear, you still need to make your annual payments to the modern feudal lord, or else you’ll find out via force of law who really owns your land. Now, it’s not as bad as the bite the bank takes out of you (or your landlord). A 30-year note at a good interest rate can easily result in you paying the value of your house twice. Property tax is nowhere near as severe. Still, the smaller it is, the leaner the local government is likely running and the less you need to actually survive.
Tax Foundation ran a cross comparison for this in 2014. Here are the results:
Income Tax Comparison (2013)
Property tax is one part of the picture, income tax is another. If you’ve got reported income, how big a bite will the state and local governments take, on average, after Uncle Sam gets his cut?
Here’s the Tax Foundation combined state/local comparison from 2013: