If you are planning on retiring soon and relocating to another state, you may want to pay attention to which states have the most friendly tax climates for their residents. Presumably, anybody relocating in retirement is seeking a lower cost of living and better weather.
So how do the states’ tax burdens stack up? A recent study from the Tax Foundation looked at what states had the highest and lowest tax burdens in FY 2010. New York had the highest taxes while Alaska lays claim to the lowest.
How do the other states compare? The table at the end of the article shows the complete rankings.
The Annual State-Local Tax Burden Ranking report estimates the average total tax burden for residents of each state, including both the in-state taxes they are subject to as well as taxes they pay to other states, such as those paid by virtue of working in, traveling to, or buying products from other states.
The nation as a whole paid 9.9% of its income in state and local taxes in 2010, the most recent year for which data are available. That percentage is consistent with the total from 2009 but down significantly from 10.3% in 1977, the earliest year for which the Tax Foundation has done such estimates.
“Some states are able to shift significant portions of their tax burdens to nonresidents, with Alaska being the most aggressive. The Last Frontier is able to export over 75 percent of its tax collections to residents of other states, by virtue of taxes on oil extraction,” said Tax Foundation economist Elizabeth Malm. “Resource-rich states, such as Alaska and Wyoming, are only the most dramatic examples of tax exporting. Major tourist destinations like Nevada and Florida are able to lower residents’ burden by taxing tourists, who are often nonresidents. Nationwide, over a quarter of all state and local taxes are collected from nonresidents.”
|Table 1. State and Local Tax Burdens by Rank – Fiscal Year 2010|
|State||State-Local Tax Burden||Rank|
|Dist. of Columbia||9.3%||(31)|
|Notes: As a unique state-local entity, D.C. is not included in rankings, but the figure in parentheses shows where it would rank. The local portions of tax collection figures for fiscal year 2010 rely on projections of local government tax revenue.
Sources: Tax Foundation calculations using data from multiple sources, primarily Census Bureau, Rockefeller Institute, Bureau of Economic Analysis, Council on State Taxation, and Travel Industry Association.
© 2014 FedSmith Inc. All rights reserved. This copyrighted article may not be reproduced without express written consent of FedSmith Inc.