Was moving from a no income tax state to an income tax state really that bad?

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JackoC
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by JackoC »

smooth_rough wrote: Sat Dec 31, 2022 10:37 am
Nyc10036 wrote: Sat Dec 17, 2022 4:09 pm
Hebell wrote: Sat Dec 17, 2022 3:47 pm Property taxes don't matter to my husband and me any more, as we plan to rent. After doing the starter home, large downtown luxury home, and Florida condominium, we only want a VERY nice apartment, or independent or assisted living when the time comes. We can get by with 750 sq ft. Easily. (Caring for two failing parents with too much stuff, and all the grief that ensued, had us radically downsizing in 2015. What a having little stuff has been)

But even with wonderful lookup tables from Kiplingers and Kitces, I think this tax season I will buy several different state add-ons to TurboTax. So I can change my home address and perturb the TurboTax state returns so I can evaluate a wide variation of what-if scenarios. (And add sales tax on top of the result based on my anticipated discretionary income)

Thanks to the previous writers who pointed out all sorts of arcane state taxes that just don't show up in the magazine articles.
You may rent, but your landlord has to pay taxes.
He has to make a profit.
If his taxes go up, your rent is following.
Not always true. Landlord vacancy rate has more impact on rent increases than anything else.
Nothing is 'always' true but long run it would be odd to assume that municipalities can lower/raise the return on capital in the rental business by raising and lowering prop taxes, which is what we'd be assuming to say that prop taxes don't eventually flow into rents. It doesn't mean other things don't *also* affect rents.

The base assumption is that return on capital tends to seek its own level across assets risk for risk, over time, and increased/reduced costs of business, of which prop tax to a landlord is one, tend to get passed through to consumers, the renter in this case. If a state increased its income tax to provide more support to municipalities or expand a property tax deduction/rebate, rents would fall all else equal even if overall tax take was constant. IOW in a state with very high prop taxes like NJ (though the income and sales taxes are pretty high here also) that's part of the explanation for high rents. It doesn't mean every squiggle up and down in rents is explained by a change in property tax, of course not.
JackoC
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by JackoC »

OrangeKiwi wrote: Fri Dec 30, 2022 11:00 pm
DoubleComma wrote: Thu Dec 15, 2022 2:19 pm All states need to generate tax revenue in someway, no income tax states rely on other sources you will be paying into. IMO there is no free rides.
Certain governments have far more debt than other governments, so it is not clear to me that all jurisdictions average out to the same. I would not worry about optimizing between a standard deviation plus or minus, but there are some places that have debt burdens multiple standard deviations from the mean.
And certain state/local governments also do more than others, or attempt to. We shouldn't have to get into a value judgement debate about that to the see the fallacy in 'all states need to generate tax revenue' as if the *same amount per capita*. It's far from that. Some state governments are just smaller/larger in terms of how they intervene with support and subsidies for various people on top of federal ones. Some are considerably more generous than others to public employees, or at least have made those employees bigger future promises (the issue of whether a state like NJ can fulfill current promises at current tax levels). From an apolitical individual financial planning POV 'it all evens out' can be a ridiculous assumption in case of high income/asset people choosing between states on much different parts of the tax/spend spectrum. In other cases, middle income people comparing states close on the tax/spend spectrum, it might indeed all even out.
spammagnet
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by spammagnet »

The OP's question was: "... for those folks that actually make the move from no-tax to tax; what your real life experience has been as far as how much the cost impacted your finances?"

This thread has devolved into vaguely political debates about taxation and government spending. That doesn't help the OP.
smooth_rough
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by smooth_rough »

JackoC wrote: Sat Dec 31, 2022 3:06 pm
smooth_rough wrote: Sat Dec 31, 2022 10:37 am
Nyc10036 wrote: Sat Dec 17, 2022 4:09 pm
Hebell wrote: Sat Dec 17, 2022 3:47 pm Property taxes don't matter to my husband and me any more, as we plan to rent. After doing the starter home, large downtown luxury home, and Florida condominium, we only want a VERY nice apartment, or independent or assisted living when the time comes. We can get by with 750 sq ft. Easily. (Caring for two failing parents with too much stuff, and all the grief that ensued, had us radically downsizing in 2015. What a having little stuff has been)

But even with wonderful lookup tables from Kiplingers and Kitces, I think this tax season I will buy several different state add-ons to TurboTax. So I can change my home address and perturb the TurboTax state returns so I can evaluate a wide variation of what-if scenarios. (And add sales tax on top of the result based on my anticipated discretionary income)

Thanks to the previous writers who pointed out all sorts of arcane state taxes that just don't show up in the magazine articles.
You may rent, but your landlord has to pay taxes.
He has to make a profit.
If his taxes go up, your rent is following.
Not always true. Landlord vacancy rate has more impact on rent increases than anything else.
Nothing is 'always' true but long run it would be odd to assume that municipalities can lower/raise the return on capital in the rental business by raising and lowering prop taxes, which is what we'd be assuming to say that prop taxes don't eventually flow into rents. It doesn't mean other things don't *also* affect rents.

The base assumption is that return on capital tends to seek its own level across assets risk for risk, over time, and increased/reduced costs of business, of which prop tax to a landlord is one, tend to get passed through to consumers, the renter in this case. If a state increased its income tax to provide more support to municipalities or expand a property tax deduction/rebate, rents would fall all else equal even if overall tax take was constant. IOW in a state with very high prop taxes like NJ (though the income and sales taxes are pretty high here also) that's part of the explanation for high rents. It doesn't mean every squiggle up and down in rents is explained by a change in property tax, of course not.
Landlords will pass through tax increases to tenants in the form or rent increase if possible. But I was just saying that there are times when landlords have to eat it, such as if the landlord is struggling to rent vacant units and is forced to cut rent and accept lower ROI. Maybe getting off subject.
guyfromct
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by guyfromct »

The reality is state income taxes are only a part of the total tax burden as sales and property tax can exceed the cost of income tax easily. It’s also the structure of the tax, flat or progressive, the brackets, standard deduction and the like that play a role. If the public schools in your community are awful and there’s no charter or magnet option private schools are effectively a tax. Poor infrastructure is a time tax. A physician living in the hinterlands of Upstate NY with a low COL may do better than one living in Miami Beach with a high COL.

It’s just like cost of living estimators, it’s incredibly personal and seldom do rules of thumb offer more than a general sense.
Northern Flicker
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by Northern Flicker »

For retirees, only 11 states tax SS benefits. A state with high income tax and low/no sales and property tax may impose a lower tax load on retirees than a state without income tax.

https://www.investopedia.com/which-stat ... ty-5211649
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Fat-Tailed Contagion
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by Fat-Tailed Contagion »

IMO if it's allowed, it's not just the high state income taxation policy that hurts, it's all of the other policies that tend to accompany high tax and regulation policy states.

My experience is the quality of life is much lower in these states.
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Northern Flicker
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by Northern Flicker »

Presumably, the OP would not be asking about the tax implications of a move to a state where the OP disfavored the quality of life.
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by oldcomputerguy »

While government spending certainly has an impact on a state's tax picture, that's not what the OP was asking about. Let's please keep the discussion focused on helping to answer the asked question: how to evaluate whether moving from a no-income-tax state to an income-tax state would be a good idea for them. Thanks.
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core4portfolio
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by core4portfolio »

Journeyman510 wrote: Thu Dec 15, 2022 2:08 pm Depends on the state and your situation. I'm sitting at 13.3% in California. We came from WA. So yeah, it's bad.
Iam in similar situation. Moving from WA to Bay Area.
What are things that spiked higher ?
Car insurance, gas price income tax and anything else ????
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MrNarwhal
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by MrNarwhal »

I look at this as a case where earning "enough" makes it not worth relocating for substantial but not life-changing financial benefit. Compared with where I live in Minnesota, neighboring South Dakota offers no income tax and a lower overall tax burden. Sioux Falls is a nice small city and we could have a comparable lifestyle there compared with the Twin Cities, at lower cost. But, it would be 4 hours farther from all of our family and friends.

It shouldn't be a terribly hard exercise to calculate the potential tax savings or cost based on your income, spending, and real estate in your target location. Then you can decide whether it is worth it to you.
michaeljc70
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by michaeljc70 »

This doesn't answer your question directly, but I live in a state with moderate income taxes that I think are higher than they should be. After retiring, since IRA withdrawals, Roth conversions, SS, pensions are not taxable in my state it is kind of a game changer. At least one state taxes just interest/dividends only so it isn't as friendly to retirees (depending if your money is in taxable vs. retirement accounts).
JackoC
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by JackoC »

spammagnet wrote: Sat Dec 31, 2022 3:41 pm The OP's question was: "... for those folks that actually make the move from no-tax to tax; what your real life experience has been as far as how much the cost impacted your finances?"

This thread has devolved into vaguely political debates about taxation and government spending. That doesn't help the OP.
But the two things are tied together if you really believe it's accurate to generalize that higher taxes will come back to *you* in the form of govt services that improve *your* financial situation or even your life *directly*. I don't think that's a valid generalization, though in some particular cases it could true.

Therefore I believe the practical question in general is how the overall tax burden varies, since 'what you get' isn't closely tied to it. But if you're a middle income person moving between averagish tax burden states then it might indeed make little net difference. This tax is higher, that one is lower, lots of other moving parts in the decision, state/local tax not a big factor overall. Whereas if you're a well off retiree in FL say moving to NJ, you're going to get slammed in the face with a 2x4 by taxes. That's really not going to 'even out'. :happy Especially considering the intersection of 'tax' and 'COL' (where a house is more expensive *and* prop tax is a higher % of the higher price). All depends who you are and which pair of states you're comparing.
nydoc
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by nydoc »

There are multiple reasons why people reside in an area vs other. I trained in NYC and developed relationships here-both personal and professional. I dream about moving to a no income tax state every month but those connections are hard to come by. Almost every hospital here has good connections for me who know my abilities well which translates into better career growth trajectory. BTW I did get a lot back in those fables benefits of NY state. So no complaints here.
WestCoastPhan
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by WestCoastPhan »

So far this year, I haven't once considered moving to a lower tax state.
JackoC
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by JackoC »

nydoc wrote: Sun Jan 01, 2023 12:52 pm There are multiple reasons why people reside in an area vs other. I trained in NYC and developed relationships here-both personal and professional. I dream about moving to a no income tax state every month but those connections are hard to come by. Almost every hospital here has good connections for me who know my abilities well which translates into better career growth trajectory. BTW I did get a lot back in those fables benefits of NY state. So no complaints here.
But you do think anybody is really saying state/local tax is the *only* factor in deciding where to live? Somebody might have that narrow a view but I wouldn't assume it about any post that focuses on tax, when tax was the question asked. For example, apropo to my previous post, I'm getting whacked continuously in the face with a 2x4 by NJ taxes. That would absolutely not 'even out' if we were to move to any number of states, the difference would be a large number (I'm not going to quote) including all financial factors: purely tax, mixed tax/COL (our eye watering property tax bill is product of a high % rate and house price way more than we'd have in some other places) and purely non-tax COL (part of which is again house, the capital tied up in it just providing owner imputed rent much of which could be deployed getting a full return elsewhere). Obviously that's not the only consideration or I'd be irrational not to have moved already. But one of the original reasons for me also was NY area job market, and retired that no longer holds. Other reasons do hold, for the time being.
spammagnet
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by spammagnet »

JackoC wrote: Sun Jan 01, 2023 12:35 pm
spammagnet wrote: Sat Dec 31, 2022 3:41 pm The OP's question was: "... for those folks that actually make the move from no-tax to tax; what your real life experience has been as far as how much the cost impacted your finances?"

This thread has devolved into vaguely political debates about taxation and government spending. That doesn't help the OP.
But the two things are tied together if you really believe it's accurate to generalize that higher taxes will come back to *you* ...
The OP didn't ask for generalized theory/opinion. They requested real-life experience from those who actually made such a move.
JackoC
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by JackoC »

spammagnet wrote: Sun Jan 01, 2023 2:38 pm
JackoC wrote: Sun Jan 01, 2023 12:35 pm
spammagnet wrote: Sat Dec 31, 2022 3:41 pm The OP's question was: "... for those folks that actually make the move from no-tax to tax; what your real life experience has been as far as how much the cost impacted your finances?"

This thread has devolved into vaguely political debates about taxation and government spending. That doesn't help the OP.
But the two things are tied together if you really believe it's accurate to generalize that higher taxes will come back to *you* ...
The OP didn't ask for generalized theory/opinion. They requested real-life experience from those who actually made such a move.
It's not a 'theory or opinion' how taxes differ in various places. To the extent it's important it's an objective fact you can look up. To the extent it's some subtle thing you need 'real life experience' to evaluate, those are the cases where it's not that important a difference.
Northern Flicker
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by Northern Flicker »

nydoc wrote: Sun Jan 01, 2023 12:52 pm ... which translates into better career growth trajectory. BTW I did get a lot back in those fabled benefits of NY state. So no complaints here.
You have no complaints because you wisely focus on your after-tax net instead of on the state (and local if any) income tax rate.

State income tax has the property that we see it aggregated as one number in a box on a tax form every spring, which can distract us from what matters.
My postings represent my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
cowbman
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Re: Was moving from a no income tax state to an income tax state really that bad?

Post by cowbman »

Northern Flicker wrote: Sun Jan 01, 2023 12:29 am For retirees, only 11 states tax SS benefits. A state with high income tax and low/no sales and property tax may impose a lower tax load on retirees than a state without income tax.

https://www.investopedia.com/which-stat ... ty-5211649
1st one sounds like Delaware.
Later sounds like Texas
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