The Geography of Taxation

The Geography of Taxation: How Where You Live Affects What You Pay An old expression tells us that there are two certainties in life: death and taxes. While that is certainly an exaggeration, most people can appreciate the financial weight that taxes put upon them. But what many people aren’t aware of is that although taxes vary state to state – considerably, in some instances – they can also vary from city to city. Even small geographic differences can have a profound effect on how much you pay in taxes. Here’s a breakdown of some of the highest and lowest rates in the U.S., and why the scales of taxation aren’t always balanced across state lines. Numerous factors can affect how much you pay in taxes on both state and municipal levels. If you’re a large state with a comparatively small population and a strong industrial base – like Alaska – you can find yourself paying no income or sales tax at the state level. NONE. On top of that, Alaskans also benefit from the lowest local sales tax of any state, pegged at an average of just 1.11%. Compare that with combined state/local sales taxes in states like California (9.08% ), New York (8.52%) and Illinois (8.22%), and you can be talking a serious piece of your paycheck.

Why is there such a large gap when it comes to taxation rates? Factors can be as random as the taxes themselves, spanning from the higher cost of operating a major city vs. a rural township, to debts passed on by administrations, or the Federal Government’s desire to wean state/city governments off of substantial monetary contributions. And then there are the taxes you don’t necessarily pay every year come April; the more ‘eclectic’ ones that are unique to certain cities and states. For example:

• Facing mounting government debts, Maryland will be raising the tax on alcoholic beverages from 6% to 9%, a healthy bump.
• In Arkansas, you’ll pay a 6% tax on tattoos.
• In Minnesota, a fur coat will feature a special 6.5% tax (on top of the state sales tax of 6.87%)
• In New York City, a prepared bagel will be taxed, but one you toast and top yourself will not.

Though some of these taxes may seem trivial, these costs add up. If you’re a pet owner and resident of North Carolina, you’ll pay pet fees of a $10/year fee for each dog or cat you own. If they aren’t spayed or neutered, that fee jumps to a whopping $75/year. Another interesting fact is that cities with higher tax burdens tend to have higher unemployment rates, while lower-taxed cities tend to have the lowest levels of unemployment. A city like Bridgeport, Connecticut, which has one of the highest tax burdens in the country, has an unemployment rate 3% higher than the state average. Still, if you’re reading this and pondering making a move to another state, there are a few factors to consider. Mainly, the fact that those higher taxes often contribute to the higher quality of major public amenities like public transportation, schools, health care services and public spaces. Sure, if you live in a city like Cheyenne, Wyoming, you’ll be paying 66% LESS than the national average of $7000 in combined state/local taxes annually, but you won’t have the amenities of a city like Chicago, where you can expect to pay 29% MORE than the national average. Also, just because a state may not charge you certain types of tax doesn’t mean that it will cost you any less to live there. Both Texas and New Hampshire have no state income tax, but feature some of the highest property taxes in the country. Ultimately, when it comes to taxes, where you live can have a huge effect. Whether it’s state or local tax, numerous factors influence how deep your local government can get their hands in your pocket. Maybe it’s time to make that big move – but beware, more than a few states will tax that too!   Share this infographic with our embed code below:

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Sources: http://taxes.about.com/od/statetaxes/a/Sales-tax-rates-highest-and-lowest.htm http://blog.turbotax.intuit.com/2011/01/03/americas-most-bizarre-taxes/ http://www.forbes.com/sites/johnwasik/2014/03/18/slash-your-taxes-big-time-with-one-move/ http://www.businessinsider.com/the-5-weirdest-sales-taxes-we-could-find-2012-1 http://www.taxrates.com/state-rates/minnesota/ http://wallethub.com/edu/best-worst-states-to-be-a-taxpayer/2416/ http://247wallst.com/special-report/2013/02/25/american-cities-with-the-highest-and-lowest-taxes/