Free State Project Forum

Please login or register.

Login with username, password and session length
Pages: [1] 2 3   Go Down

Author Topic: State Income Taxation  (Read 13053 times)

Adam Selene

  • FSP Participant
  • ***
  • Offline Offline
  • Posts: 149
  • I already shrugged. Where the hell are you?
State Income Taxation
« on: July 05, 2003, 09:07:36 pm »

While elimination of the State's income tax would be a great first platform issue for FSP activism, I feel the selection of any State with an income tax will have an extremely negative impact on immigration.

“During the 1990s, almost 3 million people moved from states with incomes taxes into states without income taxes. That means that excepting Sundays, some 1,000 people moved into states without income taxes every day for nine years,” said economist Richard Vedder, Ph.D, referring to his new study for the Texas Public Policy Foundation.

Selection of state with an income tax will have a severely negative impact on FSP-members moving from a state with no income tax. Meanwhile, selection of a state without an income taxes provides a very tangible benefit for those looking at changing their legal domicile immediately even if they are not full-time residents.

If an income tax state is selected, I suggest FSP trying to wage a campaign for its appeal immediately, rather than waiting for 20,000 members.


FSP Candidate states:

Alaksa: None
New Hampshire: None*
South Dakota: None
Wyoming: None

Delaware: 2.2 to 5.95%
Idaho: 1.6 to 7.8%
Maine: 2 to 8.5%
Montana: 2 to 11%
North Dakota: 2.1 to 5.54%
Vermont: 3.6 to 9.5%

* tax on dividend and interest income
Logged

phylinidaho

  • ****
  • Offline Offline
  • Posts: 161
  • Friend of the FSP
Re:State Income Taxation
« Reply #1 on: July 05, 2003, 09:18:30 pm »

While elimination of the State's income tax would be a great first platform issue for FSP activism, I feel the selection of any State with an income tax will have an extremely negative impact on immigration.
How do you reconcile this statement with the projected growth, which is seen as such a negative for  Idaho?

Quote
Idaho: 1.6 to 7.8%
Logged

Adam Selene

  • FSP Participant
  • ***
  • Offline Offline
  • Posts: 149
  • I already shrugged. Where the hell are you?
Re:State Income Taxation
« Reply #2 on: July 05, 2003, 09:30:09 pm »

Tax burden by state:

Alaska ranked 1st (best) at 5.5%
New Hampshire - 2nd at 6.6%
Delaware - 3rd at 7.3%
Wyoming - 8th at 8.5%
South Dakota - 9th at 8.5%
Montana - 14th at 9.1%
North Dakota - 34th at 9.8%
Idaho - 40th at 10.2%
Maine - 50th at 12.2% (the worst except for DC at 12.9%)

National Average: 9.7%

http://money.cnn.com/pf/features/lists/statelocaltaxes/index.html

Although New Hampshire ranks the 2nd worst state for property tax burden, at $1,641 per capita.

http://money.cnn.com/2003/04/08/pf/taxes/q_taxfriendly/


Estimated tax burden of major state and local taxes (income, property, sales and automobile-related taxes and fees) for a family of four with a household income of $75,000 in the largest city in each state and in Washington D.C.


Portland, Maine ranked the 7th worst city for state-local tax burden, at 12.0%.

Cheyenne, Wyoming - 1st (best) at 3.7%
Anchorage, Alaska - 2nd at 4.4%
Sioux Falls, South Dakota - 5th at 5.2%
Fargo, North Dakota - 10th at 7.5%
Wilmington, Deleware - 12th at 7.7%
Billings, Montana - 13th at 7.7%
Manchester, New Hampsire - 16th at 8.1%

Median: 9.0%; Average: 9.3%

http://money.cnn.com/pf/features/lists/citytaxes/
Logged

Adam Selene

  • FSP Participant
  • ***
  • Offline Offline
  • Posts: 149
  • I already shrugged. Where the hell are you?
Re:State Income Taxation
« Reply #3 on: July 05, 2003, 09:44:32 pm »

How do you reconcile this statement with the projected growth, which is seen as such a negative for  Idaho?

Well obviously it is not the only factor.

For people moving to Idaho to take a new or better jobs (Idaho's primary reason for population growth), Income tax is a nominal factor. Higher wages and/or better job prospects outweigh the burden (assuming they even migrated from a income-tax-free state).

For FSP-members looking to escape tax/filing burden, especially those who have never in their lives had to pay a State income tax (like me), it comes as a bit of a shock.

The biggest negative is for people like me, who have the flexibility to maintain a legal residence only of record/convenience. Such people can easily their flag of convenience to the FSP state; however filing state income tax is not exactly convenient.

Actually, more research needs to be done with regards to the nature of each of these taxes. Do they tax all income, or only salaries paid by employers within the state? And what's the deal with New Hampshire's dividend tax?!
Logged

Adam Selene

  • FSP Participant
  • ***
  • Offline Offline
  • Posts: 149
  • I already shrugged. Where the hell are you?
Re:State Income Taxation
« Reply #4 on: July 05, 2003, 09:59:06 pm »

This is somewhat far-fetched, but is a possible strategy/benefit of selecting an income-tax state:

Strategy:

Step A) Reform the tax's income tax code to be simple X% of whatever their federal tax liability is. This simplifies paperwork and accounting, tax payers would simply make an additional copy of their federal tax forms. And an advatage for the State is they know exactly how much money their residents are paying to the federal government.

Step B) Further reform, rather than employers having to deal with two withholding payments, and individuals having to make two tax payments, let them make one. Submit all forms and payments to the State, and the State will forward to the I.R.S.

Step C) At this point, when negotiating with the federal government, the State could withhold tax payments from the I.R.S. If the federal government withholds money coming to the State, the State withholds an equal amount of money due to the federal government.


Personally I feel that any state reform, all the way to eliminating all State taxation and government, is worthless given the Federal tax/regulatory burden is far greater. Furthermore, the state is completely strapped about privatizing services, because the federal government takes the money people would otherwise have to pay for the services themselves; and then will deny giving the money back to the State when the services are privatized (roads, education, welfare, etc).
Logged

Adam Selene

  • FSP Participant
  • ***
  • Offline Offline
  • Posts: 149
  • I already shrugged. Where the hell are you?
Re:State Income Taxation
« Reply #5 on: July 05, 2003, 10:11:27 pm »

In a nutshell, New Hampshire taxes 5% of all dividend and interest income over $2400 per annum.
Logged

Michelle

  • FSP Participant
  • *****
  • Offline Offline
  • Posts: 748
Re:State Income Taxation
« Reply #6 on: July 05, 2003, 10:29:26 pm »

In a nutshell, New Hampshire taxes 5% of all dividend and interest income over $2400 per annum.

I wouldn't know, because I certainly don't make $2400 per annum in dividend and interest income (as most people don't), but according to another board poster, if you do qualify it is easy to avoid with a trip to an accountant.

Adam, you have seen this, haven't you? It is a ranking by Liberty Magazine - the report is quite long and detailed. Unfortunately, I haven't found it online, but if anyone is interested I can give you the citation to it (need to look for it) or maybe scan the summary pages:

Taxes as a percentage of gross personal income:

#1 NH 4.54% - 1st in nation
#2 SD 5.05% - 2nd in nation
#3 MT 7.26% - 28th in nation
#4 WY 7.61% - 31st in nation
#5 ND 7.94% - 34th in nation
#6 AK 8.04% - 36th in nation
#7 ID 8.32% - 39th in nation
#8 ME 8.63% - 43rd in nation
#9 DE 9.19% - 47th in nation
#10 VT 9.57% - 48th in nation

State taxes per capita:

#1 SD $1226/person - 1st in nation
#2 NH $1372/person - 4th in nation
#3 MT $1564/person - 9th in nation
#4 ND $1826/person - 25th in nation
#5 ID $1837/person - 28th in nation
#6 WY $1952/person - 34th in nation
#7 ME $2087/person - 37th in nation
#8 AK $2270/person - 41st in nation
#9 VT $2416/person - 44th in nation
#10 DE $2721/person - 48th in nation

These take those "high property taxes" that you mention in NH into account, but because we have no income or sales tax we still come out ahead (way ahead in some cases) than the other states.
« Last Edit: July 05, 2003, 10:32:07 pm by Michelle »
Logged
Please join NHLA today! http://www.nhliberty.org With every new member we gain political weight to support liberty-friendly candidates and promote liberty throughout NH.
Support the Liberty Scholarship Fund. Please make a donation today! http://www.lsfund.org

Adam Selene

  • FSP Participant
  • ***
  • Offline Offline
  • Posts: 149
  • I already shrugged. Where the hell are you?
Re:State Income Taxation
« Reply #7 on: July 05, 2003, 10:49:57 pm »

New Hampshire:

191,720 tax returns declaring dividend income, representing 30% of all tax returns filed, declaring a total of $824,461,000 of dividend income, according to the Tax Foundation.

That's an average of $4,300 per return in dividend income, although that doesn't necessarily mean much given the distribution is not likely to be very even.

These stats were to calculate saving from the elimination of the federal dividend tax, so they're not well tailored to analyzing the state tax.

I'm sure it's a minor tax, but it SHOULD always be footnoted when claiming New Hampshire has no state income tax, that it DOES tax interest and dividend income.
« Last Edit: July 05, 2003, 10:50:58 pm by Adam Selene »
Logged

jgmaynard

  • FSP Shadow Advertising
  • FSP Participant
  • *****
  • Offline Offline
  • Posts: 2288
    • The Light of Alexandria
Re:State Income Taxation
« Reply #8 on: July 05, 2003, 11:03:04 pm »

Hey Adam:

Could you please post a link to the data you are looking at?

If you are talking about people who declared interest on their fed return, 30% sounds about right. But you would need about $80,000 in the bank to earn $2400 interest at 3%. The New Hampshire standard of living may be high, but it's not THAT high! :)

JM
Logged
The Light of Alexandria By James Maynard

A history of the first 1,000 years of science, and how it changed the ancient world, and our world today.



http://www.lightofalexandria.com

Adam Selene

  • FSP Participant
  • ***
  • Offline Offline
  • Posts: 149
  • I already shrugged. Where the hell are you?
Re:State Income Taxation
« Reply #9 on: July 06, 2003, 01:58:08 am »

Hey Adam:

Could you please post a link to the data you are looking at?

If you are talking about people who declared interest on their fed return, 30% sounds about right. But you would need about $80,000 in the bank to earn $2400 interest at 3%. The New Hampshire standard of living may be high, but it's not THAT high! :)

JM

http://www.taxfoundation.org/fiscalfacttable.html

Yes, as I said this numbers are from an analysis of the federal dividend tax, and hence are federal filing statistics, not state.

These numbers are *dividend* income, not interest; although NH taxes them cumulatively.

There are actually a great number of self-retired individuals (as opposed to pensioners) who live off of dividend and interest income (esp. annuities) of a few thousand a month. These people will need to consult a tax planner should New Hampshire be selected.

BTW, does anyone have stats/comparison on business and corporate taxation? I'll have to dig some up.
Logged

Adam Selene

  • FSP Participant
  • ***
  • Offline Offline
  • Posts: 149
  • I already shrugged. Where the hell are you?
Re:State Income Taxation
« Reply #10 on: July 06, 2003, 02:05:26 am »

It occurs to me that FSP Inc. should have statistics of membership by State, given that is a required field upon signup.

Are those stats published anywhere, or can they be posted here?

Of particular interest is how many members are registered from non-income-tax states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming); and hence may find a state income tax particularly distasteful.


BTW, the state tax rates I took from here:
http://www.taxadmin.org/fta/rate/ind_inc.html

Interestingly, Rhode Island has an income tax that is simply 25% of federal tax liability. (see my strategy post above)
Logged

freedomroad

  • Guest
Re:State Income Taxation
« Reply #11 on: July 06, 2003, 02:57:39 am »


BTW, does anyone have stats/comparison on business and corporate taxation? I'll have to dig some up.


Corp. Income Tax
WY None
SD, MT Low
AK, ID Average
ME, DE, ND, NH*, VT High

* NH also has a Business Enterprise tax
Logged

freedomroad

  • Guest
Re:State Income Taxation
« Reply #12 on: July 06, 2003, 03:07:28 am »

It occurs to me that FSP Inc. should have statistics of membership by State, given that is a required field upon signup.

Are those stats published anywhere, or can they be posted here?

Of particular interest is how many members are registered from non-income-tax states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming); and hence may find a state income tax particularly distasteful.


BTW, the state tax rates I took from here:
http://www.taxadmin.org/fta/rate/ind_inc.html

Interestingly, Rhode Island has an income tax that is simply 25% of federal tax liability. (see my strategy post above)


I come from TN, which has no personal income tax, although, alike all of the FSP states (except WY) it does have business income taxes.

I've spent much of mu adult life trying to figure out how to lower the amount of money of pay in sales taxes and I have get the amount very low.  So, sales tax states do not bother me.  What does cause a major concern for me, though, is state with an income tax, or even worse, state with no sales tax and an income tax.

If a state has an income tax I am screwed.  I'll have to pay it.  Sales taxes are very easy to reduce and no problem.

States that currently have no sales tax but have an income tax are the worst.  They have come to reply on the no sales tax.  The usually have large amounts of companies and stores right near their borders (or in their largest towns near the borders) and these companies, stores, and towns would be hit real hard if the states got decided to get rid of their income tax and replace it with a sales tax.

Sales taxes are much more libertarian than income taxes.  That is a good way to help determine how libertarian a state is.  I could never imagine how a libertarian-leaning state could have an income tax but no sales tax.

See these from the Wyoming Report #2,
http://www.freestateproject.org/wyoming2.htm#taxes
"What is the difference between states with no income tax and states with no sales tax? Which is better? According to economists from the Austrian school (the best known libertarian economic school), not having an income tax is better than not having a sales tax. In addition, a sales tax, or consumption tax, is fairer than an income, or production tax. An income tax is more likely to hurt production than a sales tax is likely to hurt consumption. In fact, the Cato Institute, a leading libertarian policy organization, authored a policy report that explains why the federal government should end the national income tax and replace it with a national sales tax. Constitutional Republican Alan Keyes believes that a sales tax is more in line with Constitutional principles than an income tax. The Republican Liberty Caucus, a libertarian organization founded by Ron Paul (former Libertarian Party presidential candidate and the only libertarian U.S. Rep. in Congress), believes that a sales tax is more inline with freedom principles than an income tax. Also, the National Taxpayers Union is against both progressive and income taxes. This same principle holds true on a state level. In addition, sales taxes tend to be more in line with libertarian thought, because they are usually flat. On the other hand, state income taxes tend to be anti-libertarian because they usually have progressive rates. Again, the Cato Institute agrees with this train of thought.

Not only that, but all of the candidate states except for North Dakota and Delaware are tourist hotspots. The tourists that visit these states are subject to state sales taxes but are not subject to state income taxes. This means that a state, which relies more on sales taxes receipts, places less of a tax burden on its citizens. For these reasons, states that do not have income taxes (like Wyoming) have an advantage over states that do have income taxes (like Idaho, New Hampshire, and Montana.) "
Logged

freedomroad

  • Guest
Re:State Income Taxation
« Reply #13 on: July 06, 2003, 03:08:57 am »

Here is some more food for thought from the Wyoming Report #2,

"Low-tax strategies for individuals

Low-tax strategies are important to some FSP members. These FSP members do not like to pay many taxes, and adjust their lives so that they may avoid as many taxes as possible. Wyoming is one of three candidate states without an income tax on wages, interest, or dividends and the only state that has no corporate tax. Wyoming, like many states with large rural populations, has a great deal of trade and barter activity. This activity usually goes unreported and is not counted as income. Wyoming has very low property taxes and borders sales-tax-free Montana. In fact, the metropolitan and shopping center of Montana (Billings) is less than two hours away from Sheridan, Cody, Lovell, and Powell WY. Wyoming residents from Gillette, Buffalo, Worland, and Jackson often shop in sales-tax-free Montana. These towns offer the unique opportunity (found no where else in the country) of no inventory, corporate, wage, interest, dividend, or sales tax, and very low franchise and property taxes. All of this, in addition to the barter trade, makes Wyoming the best state for low-tax strategies. "
Logged

freedomroad

  • Guest
Re:State Income Taxation
« Reply #14 on: July 06, 2003, 03:10:59 am »

Here are different tax rankings:


Here are rankings for the major tax rates:


Income Tax
WY, AK, SD None
NH, ND Low
DE, MT, ID Average
VT, ME Very High

Sales Tax
MT, DE, NH, AK  Very Low
ID, VT, ME, WY, SD Low
ND Average

Corp. Income Tax
WY None
SD, MT Low
AK, ID Average
ME, DE, ND, NH*, VT High
* NH also has a Business Enterprise tax

Property Tax WY DE ID MT AK SD VT ME NH


Logged
Pages: [1] 2 3   Go Up
 

anything