Is it really cheaper, tax wise, to live in a state without state income taxes?

[COSteve]

The cost of living in Colorado is so high that it’s the most expensive non-coastal state in the whole US. We have a state income tax normally at 4.4% but lowered this year to 4.25%. Our daughter lives in Austin, TX where they don’t have state income taxes and my sister lives in Florida where they don’t either. While both are coastal states, neither has the high cost of living that Colorado has.

So, my question is; Does a state with no state income taxes really collect fewer total taxes from their citizens?

I’m fortunate to have a great retirement income (we saved, invested and lived poor [according to our kids] for over 50 years so we'd have enough for retirement) and as such, I actually make a bit more than my daughter even though she’s got a really good job as an HR director for an international investment company. My sister is also retired and makes just slightly less than I do in retirement.

So, how do our total state taxes match up? I pay property and state income taxes and both my daughter and sister just pay property taxes. My home is worth 2 times what my daughter's is yet the combination of my total property taxes plus my state income taxes is less than 2/3 what her property tax is alone.

My sister is pretty much the same but like me she’s retired. Her home is also worth ½ of what mine is yet the combination of my property tax and state income tax is again slightly more than 2/3 of just her property tax alone. So, is it really cheaper, tax wise, to live in a state without state income taxes?

[GunnyMack]

I can't tell you for certain but I know my property taxes are HIGH!

The no tax thing must be good, Bidum left Pennsylvania for Delaware decades ago!

[jeepnik]

Back in 1978 property taxes were high and growing in leaps and bounds. The citizens rebelled and passed a law that drastically lowered property taxes and set a limit on the percentage it could be raised a year. The politicians punished the citizens by drastically reducing services. But the citizens refused to budge so the politicians figured out since they couldn't raise taxes, they would charges fees which are restricted by that law. However this year the politicians are at it again trying to pass a law that would gut the property tax controls.

[KWK]

Here is one estimate of the total tax take per capita by the various states. It's not a complete picture. Percentage of income taken would be a better measure.

Our daughter moved to Colorado this year to pursue a PhD in Boulder. She agrees Colorado is expensive.

[Griff]

Methinks in depends on where you live in a no-income-tax state. My former home in CA was a 1,500 sf house on a 66'x100' lot in a fairly medium sized city. It was worth (when I moved) about 1-1/3 what my home I purchased in TX cost. State income tax in CA at the time was about 7.25% IIRC. My property taxes in CA were approximately what mine new home in TX were. CA is probably not a great comparison tho'. I just know that I could never have afforded to own the type/size of property in CA that I have in TX. (2,200 sf on 15 ac). You also have to look at sales tax. CA = 8-1/2% in 1990, TX - varies by county, where I live it was 7.25% in 1990. Another expense was vehicle registration. My 2 year old p/u in CA was $438/yr in 1990, in TX, as a "farm truck", it was $54. Which even its replacement remains the same.

[Ray]

I live in a lower total tax load state but when our property taxes were last reassessed mine doubled and many found theirs trebled or even quadrupled. The individual county property assessors offices all mobbed together to conspire to do this to boost lagging revenue by circumventing legalities. When the heads-up warning postcards were mailed out they simply had to disconnect the phone lines from irate taxpayers calls. They got away with it as there are no greater slothfull civil servants than property tax auditors. They loathed to snoop clipboard in hand due to angry dogs and diligent homeowners so they reverted to drone use to look for unreported improvements that could be taxed. The drones soon disappeared in poofs of fine birdshot so the assessors resorted to satellite imagery and never left their desks. This last time around (four years ago) they hired contractors to actually jump fences and lurk in the landscaping and take photos. All of the unreported improvements got ciphered and 16 to 24 years of additions/improvements & sheds & garages & carports & pools got calculated all at once so it really wasn't as bad as it seemed. Many of those whose tax bills were trebled & quadrupled were able to appeal and get some discounts but everyone's doubled at the least.

Long story short, many local civil servants retired during the sinomicrobe horror. Most of those jobs in the road/highway departments require a commercial driving license. When everybody went back to work those retirees with commercial licenses could not be replaced at the pre-pandemic wages due to the huge demand for truck drivers. So they increased wages to compete and suddenly there was a budgetary crisis. They could not raise taxes of themselves but they could pad the property tax bill by counting metal roofs & vinyl siding & squirrel feeders & concrete statutaries & birdbaths.

[JimT]

Here is one estimate of the total tax take per capita by the various states. It's not a complete picture. Percentage of income taken would be a better measure.

Our daughter moved to Colorado this year to pursue a PhD in Boulder. She agrees Colorado is expensive.

That's quite an interesting chart. Thanks for the link.

[COSteve]

Here is one estimate of the total tax take per capita by the various states. It's not a complete picture. Percentage of income taken would be a better measure.

Our daughter moved to Colorado this year to pursue a PhD in Boulder. She agrees Colorado is expensive.

Clearly that taxfoundation.org chart doesn't include property taxes as both Texas and Florida show average per capita estimates that are about 1/3 of just the property taxes both my daughter and sister are paying currently.

Edit to add: Our son graduated from CU in Boulder with a PhD in Physics in 2014 and now works for NIST, a government lab in Boulder run by the Commerce Dept.

[Ray]

A clarifying case in point to my above reply. Suppose you enclose an under domicile roof carport to increase living area. With the overreaching reassessments I mentioned the square footage increase was ciphered in but the value of the carport that no longer exists was not subtracted. Had a swimming pool that had outlived its functionality ? Fill it in and plant shrubbery but the pool was not subtracted. As long as you are not a smug civil servant it makes one think wistfully of days of yore and indignant mobs with pots of scalding treacle and sacks of feathers.

[Bill in Oregon]

Here's a chart on total state tax burden.

https://www.cpapracticeadvisor.com/2024 ... en/103495/

[JimT]

Here's a chart on total state tax burden.

https://www.cpapracticeadvisor.com/2024 ... en/103495/

Hmmm ... that lays it out nicely. Thanks Bill.

[KWK]

Clearly that taxfoundation.org chart doesn't include property taxes as both Texas and Florida show average per capita estimates that are about 1/3 of just the property taxes both my daughter and sister are paying currently.

Our son graduated from CU in Boulder with a PhD in Physics in 2014 and now works for NIST, a government lab in Boulder run by the Commerce Dept.

The Tax Foundation chart includes all taxes collected at the state and local level, including those levied on businesses. Stated per capita, the calculation would make states with higher birth rates look better.

The chart from CPA Practice Advisor is labeled as three taxes on households and is given relative to income. The taxes on business don't enter this calculation, but of course comes back to bite residents in the form of higher prices for goods and services. The calculation at least accounts for some states having higher incomes and thus able to support higher taxes.

Either of these two ways of looking at it, Colorado taxation is greater than Texas and Florida. The second chart claims CO is between FL and TX in property taxes alone, as a % of income. It says CO is higher than both for the taxes considered. The experience of you and your relatives is different than that, though. It probably varies among towns in each state.

A table of states by household income shows that CO is well ahead of TX and FL. That's worth considering.

My daughter is angling for a position at NREL in Golden. She is interested in much of the chemical engineering research being done there.