The Most and Least Tax-Friendly Places to Live in the USA
by www.SixWise.com
The 2006 tax season has just ended and, as usual, Americans
have strong feelings about the U.S. tax system. "The
majority of U.S. adults say the federal income taxes they
pay are "too high," that the federal tax code is
complex, and that the U.S. tax system is in need of major
changes or a complete overhaul," according to the Tax
Foundation's 2007 Annual Survey of U.S. Attitudes on Taxes
and Wealth.
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Wondering how your tax money is spent? The majority
of federal income taxes go toward the military, followed
by health spending and paying interest on the national
debt.
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At the federal level, the report found that the estate tax,
followed by gasoline taxes and personal income taxes are viewed
as the "most unfair" taxes, while at the state and
local levels gasoline taxes, followed by local property taxes
and motor vehicle taxes earned the most unfair designation.
That said, Americans are paying vastly different amounts
for taxes depending on where they live, as states and even
cities vary widely on what, and how much, they tax.
Where are Your Tax Dollars Going?
Before we delve into the most tax-friendly (and the least
tax-friendly) U.S. regions, it's worth noting exactly where
all of your hard-earned money is going.
Income taxes, after all, are the largest single source of
revenue to the federal government, accounting for about $1
trillion in 2006 alone, according to the Tax Foundation.
So how are these and other taxes being spent? Here is a breakdown
of how total federal funds (to which your income taxes are
allocated) were spent in 2005, according to the National Priorities
Project (NPP), a non-profit education and advocacy organization:
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Military: $532.2 billion
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Health: $377.1 billion
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Interest Paid on the National Debt: $348.5 billion
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Income Security: $124 billion
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Education: $76 billion
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Veterans' Benefits and Services: $69.1 billion
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Nutrition: $50.7 billion
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Housing: $37.9 billion
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Natural Resources and the Environment: $26.6 billion
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Job Training: $6.3 billion
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Other: $217.2 billion (includes international affairs,
general science, space and technology, energy, agriculture,
commerce and housing credit, transportation, community
and regional development, labor and social services, justice,
general government, and undistributed offsetting receipts)
How is My Tax Money Broken Down?
If you'd like to break your tax payments down even further,
NPP
has a calculator to help you do just that. You can input
your federal income tax and see how your dollars are being
spent. For instance, for someone who paid $15,000 in federal
income tax in 2005, here is how that money was spent:
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If you want to pay as little as possible for taxes,
you may have to move to Alaska, the country's most tax-friendly
state.
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28.5% (or $4,275) went to the military
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18.7% (or $2,805) went to pay the interest on the debt
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20.2% (or $3,030) went to health care
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6.6% (or $990) went to income security
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4.1% (or $615) went to education
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3.7% (or $555) went to benefits for veterans
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2.7% (or $405) went to nutrition spending
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2% (or $300) went to housing
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1.4% (or $210) went to environmental protection
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0.3% (or $45) went to job training
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11.6% (or $1,740) went to all other expenses
Where are the Most Tax-Friendly, and Least Tax-Friendly,
Places to Live?
If you're looking for the most tax-friendly state, the Tax
Foundation has found it in their annual report that compares
the average citizen's state and local tax burden in every
state and the District of Columbia.
The tax burden includes state and local income taxes, property
taxes, sales taxes, luxury taxes, fuel taxes and others. For
2006, the most tax-friendly states were:
Meanwhile, those in the following states were not so lucky,
as their locales ranked among the worst places to live, tax-wise:
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Vermont (14.1%)
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Maine (14.0%)
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New York (13.8)
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Rhode Island (12.7%)
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Ohio (12.4%)
The city you live in can also make a big difference in the
amount of taxes you pay, and some of the best and worst tax
cities, cited in a recent CNNMoney.com article, may surprise
you:
Most Tax-Friendly Cities
Least Tax-Friendly Cities
Interested to know where your state and city rank overall?
Check out CNNMoney.com's rankings of tax burden by
state and by
city.
Recommended Reading
Tax
Audits: What Signs Make You More Likely to be Audited by the
IRS?
How
to Get the Greatest Tax Advantages by Donating Money to Charity
Sources
The
Tax Foundation
National
Priorities Project
CNNMoney.com