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Letter Re: Total Burden of State Taxes

Mr. Rawles,
I reviewed the article from MSN Money regarding property taxes by state, mentioned by "J Eagle". I could not help to look at Alabama because that is my home state. Unfortunately, I am not there now. However, property tax is low in Alabama but they have a 5% personal income tax and sales tax is charged on everything one purchases. This includes big ticket items such as cars and tractors (at a reduced rate from normal sales tax) to basic necessities (food, clothing, guns and ammunition at the normal sales tax rate). They also charge the pharmacies a tax of $1 per prescription filled, which is ultimately passed onto the consumer. Also, each county and/or municipality can increase their property tax by a vote of the people - if the state legislature allows the citizenry to have a referendum. This means that the state is controlled by politicians in the legislature.

All this is said to say, look at the total tax structure of any state. A state, such as Texas has higher property tax, but no personal income tax. This could be much better overall.

I am an accountant and have had many years to look over many different states income tax structure. While I use to look only at the tax structure of a state, I now look at the states' attitude toward preparedness. You see, many states will not tax seed purchased, nor trees purchased. Some states will not tax food purchased nor clothing. I have tried to learn which states tax what items. Also, shopping via the internet can be a tax saving tactic, but be careful!
Some states are planning to audit credit card statements to tax items that no tax was paid when items were purchased out of state, but consumed in their state. This is called "Use Tax" in some states. It can be potentially a tax trap.

When I travel, I will set aside one to three hours to go shopping in states where I can save between 8 and 10 percent on purchases I need. Many times I am in a SUV and transporting the goods is not an issue. When I was in a Costco for the first time, I was in a tax friendly state for food purchases. Unfortunately, I was in a rental car and had to fly home the next day. I could not help to buy some items my family needed for our "'burban" retreat (which nobody knows about) but I was able to ship the items via UPS to my house - still cheaper overall that I would have paid at home.
My wife says that I have an attitude of over-analyzing. But I hope to be prepared if needed. - Happy Howie

JWR Replies: You are correct that it is the total tax burden for each state that must be considered, not just property taxes. I have some instructive tables on this in my recently released book “Rawles on Retreats and Relocation.” Every state seems to get its "pound of flesh", one way or the other. Clearly , however, the more populous/intrusive socialist Nanny States like California, Wisconsin, and Massachusetts take a bigger total bite than most other states. Folks that are in their prime income earning years are rightfully more concerned with income taxes. This makes states with no personal income tax (like Nevada and Wyoming) quite appealing. But for poor folks like me, and for retirees that are "land rich and cash poor", property taxes are much bigger factor. Also don't overlook the insidious taxes like private vehicle registration. That can make a big difference, especially if you have several cars and trucks. For example, depending on the age of the vehicle, registering in Idaho costs only $24 to $48 per year, but I've heard that just across the state line in Montana, depending on the variable "County Option" tax it typically costs $48 to $257 per year. Ouch! (But of course there is no sales tax in Montana, so there are trade-offs.)

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