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Would Eliminating The Property Tax Deduction Be A Big Deal ?

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By Peter J Reilly, Contributor

This just in from the Tax Foundation: This week, the Senate Finance Committee is considering the elimination of major tax expenditures as a starting point for a comprehensive reform effort, including the property tax deduction for owner-occupied housing. According to new researchby the nonpartisan Tax Foundation, however, the elimination of this deduction could have a negative effect on jobs and economic growth, if not supplemented with other pro-growth reform options. …read more

Source: FULL ARTICLE at Forbes Latest

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These 7 States Tax Homeowners the Hardest

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By Dan Caplinger, The Motley Fool

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Paying income tax is hard enough for those struggling to make ends meet. But with property taxes, even those who have no income end up having to bear their share of the overall tax burden.

Property taxes are typically imposed and collected by local tax authorities rather than state revenue departments, but property tax revenues have a big impact on the decisions that state governments make on where to apply their financial resources. Still, you can get a sense of how much of a property tax burden state residents bear by looking at the average tax paid per person. Using figures from the most recently available data from the Tax Foundation and land and home values from the Lincoln Institute, let’s look at seven states that impose the highest average property taxes on their residents.

7. Rhode Island
Property taxes in Rhode Island average $2,083 per person. With average home values of $241,000 just barely putting Rhode Island in the top third of the nation, high tax rates and a high density of urban land help push the state’s overall property tax burden higher. Moreover, with just over 1 million people, Rhode Island doesn’t have many people over which split the fixed costs of state government.

6. Vermont
In Vermont, the average property tax bill is $2,166. Vermont’s land values come in just below Rhode Island‘s at $239,000, and the state has a much more rural character than Rhode Island‘s small size and coastal proximity. As with Rhode Island, Vermont’s small population of around 625,000 provides only a limited base on which to tax.

5. New York
New York imposes an average of $2,280 in property taxes per person. Average home values come in at $316,000, putting the state in the top 10. Yet given the huge disparities in real-estate prices throughout the state, that burden is very unevenly spread. Rural tax rates in upstate New York can be relatively reasonable, but in New York City, you’ll see tax burdens that are more in line with those of neighboring states that are dominated more by the city’s metropolitan area.

4. New Hampshire
New Hampshire charges an average of $2,463 per person in property taxes. At $178,000, its average home values are very low, but the lack of a general state tax on wage and salary income contributes to the need to raise revenue elsewhere. Although New Hampshire has a 5% income tax that applies to dividends and interest income, it’s not enough to keep the state from having to charge much higher rates than you’ll find in many areas. A relatively small population of just 1.32 million also adds to the burden.

3. Connecticut
Connecticut residents pay an average of $2,522 per person in property taxes. High property values of $347,000 put the state in the top five of the nation, and the large proportion of real estate that’s located either along the waterfront

Source: FULL ARTICLE at DailyFinance

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These 6 States Tax You the Least

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By Dan Caplinger, The Motley Fool

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Anywhere you go in the U.S., you’ll still have to pay taxes. But choosing low-tax states to live in can free you from your tax burden a lot faster than in other parts of the country.

The nonprofit Tax Foundation created Tax Freedom Day as a way of easily comparing the relative amount of taxes that people pay to federal, state, and local revenue agencies. You can do the same simply by taking the total you pay in tax and dividing it by your income, telling you what percentage of the year you spend paying your fair share of taxes.

For the U.S. overall, Tax Freedom Day won’t come until this Thursday, April 18, and as we saw yesterday, some states will have to wait quite a while longer before they can declare independence from taxes. But in several states, Tax Freedom Day has already come and gone. Let’s look at the six least-taxed states in the U.S., along with a brief explanation of what makes their taxes so much lower than the rest of the country.

6. South Dakota, April 4
South Dakota makes the list for a couple of key reasons: It doesn’t have an individual income tax, and it doesn’t charge businesses on their corporate income, either. The state gets its income from property and sales taxes, but a state sales tax of 4% with local taxes of about 1.8% still doesn’t raise the total burden too far. Property taxes average less than $1,150 per person.

4 (tie). New Mexico, April 3
Where New Mexico stands out is in low property taxes, with an average of just $633 each year. By comparison, a 4.9% top income-tax rate and a 5.125% sales tax actually bring in a fairly substantial amount of tax, with the state’s per-person sales and excise tax liability among the top quarter of states across the nation. Corporate income-tax rates are also fairly high at 7.6%, although the rate is low enough to have enticed chipmaker Intel to move to the area in the early 1980s and gradually expand its production facilities over time.

4 (tie). South Carolina, April 3
South Carolina‘s tax rates don’t seem all that attractive, with a 7% maximum individual income-tax rate and a 6% sales tax. But low property taxes of just over $1,000 on average help keep total taxes down, and a relatively small business presence leads to very low corporate-tax revenue.

3. Tennessee, April 2
Tennessee’s claim to tax fame is that its 6% income tax applies only to interest and dividend income, leaving wages untouched. Property taxes of less than $800 are also extremely low, although a sales tax of 7% helps the state raise needed revenue. A flat corporate-tax rate was probably one incentive that attracted shipping giant FedEx to locate its headquarters in Memphis.

1 (tie). Mississippi, March 29
Mississippi earns high honors on the list with its

From: http://www.dailyfinance.com/2013/04/14/these-6-states-tax-you-the-least/

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The States With the Highest Income Taxes

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By Dan Dzombak, The Motley Fool

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There’s little time left until taxes are due. While seven states have no income tax, 43 states and D.C. do. Most states use some type of progressive tax on income so that people with higher incomes pay higher rates, and that makes calculating how much you owe to be quite a hassle.

Let’s look at what your income-tax burden would be if you were filing independently with an income of $100,000, as simply looking at a state’s absolute highest income-tax rate can offer a distorted picture.

The Highest Income Taxes for Income of $100,000

 Rank

State

Average Tax Rate at $100,000

Marginal Tax Rate at $100,000

1

Oregon

8.04%

9%

2

Hawaii

7.25%

8.25%

3

Maine

7.06%

8.5%

4

District of Columbia

6.99%

8.5%

5

North Carolina

6.78%

7.75%

6

California

6.59%

9.3%

7

Idaho

6.44%

7.4%

Sources: Tax Foundation, author’s calculations.

While these states (and D.C.) have high income taxes, everyone’s situation is different. In some cases, a life of paying fewer taxes is as simple as picking up and moving across state lines. Before you do, though, you should take into consideration how each state makes money, and you’ll also want to figure in local taxes and how those will affect your particular situation. A good place to start is the Tax Foundation, which has been collecting data on taxes since 1937 and takes into consideration an average of both state and local taxes.

The tax leaders
Let’s go through the states with the highest income tax one by one, using the Tax Foundation’s most recent data, which is from July 2012.

1. Oregon
Oregon ranks first on our list, with a progressive income tax that starts at 5%, rises to 7% at income above $3,150 and 9% above $7,950, and tops out at 9.9% on income above $125,000. It is one of six states that allow taxpayers to deduct their federal income tax from their taxable income, though it caps the deduction at $5,950.

2. Hawaii
Hawaii has a progressive income tax that starts at 1.4%, rises multiple times till it hits 8.25% at $48,000, and then climbs a few more times till it hits 11% at income above $200,000. Hawaii’s 11% marginal tax rate is the highest of any state.

3. Maine
Maine also has a progressive tax that starts at 2% and then after a few tiers peaks at a rate of 8.5% on income above $20,350.

4. D.C.
While the District of Columbia is not a state, much to the angst of its residents, it still levies a progressive income tax that starts at 2%, rises to 6% for income above $10,000, and then climbs to 8.5% for income above $40,000. The rate peaks at 8.95% for income above $350,000.

5. North Carolina
North Carolina‘s progressive

From: http://www.dailyfinance.com/2013/04/14/the-states-with-the-highest-income-taxes/

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These 7 States Tax You the Hardest

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By Dan Caplinger, The Motley Fool

7. Minnesota, April 23
Minnesota has a relatively high combination of individual income and sales taxes, with a top income tax rate of 7.85% and a 6.875% sales tax. But its corporate income tax of 9.8% is especially high, despite the fact that top private employer Target is headquartered in Minneapolis. Even relatively low property taxes averaging just over $1,400 aren’t enough to give residents much relief.

6. California, April 24
California is notorious for having retroactively raised its income tax rates on high-income taxpayers last year, imposing a top rate of 13.3%, the highest of any state. State sales taxes of 7.5% and a fairly high corporate income tax rate also add to Californians’ tax burden, even though it hasn’t stopped many high-profile technology companies from calling the state home. Limitations on property tax increases have kept many residents from bearing the full burden of skyrocketing property values during the housing boom.

4 (tie). Massachusetts, April 25
Massachusetts has a relatively low flat income tax of 5.25%, but a recent increase in its sales tax to 6.25% boosted overall revenue. With property taxes averaging nearly $2,000, homeowners get a triple tax burden, although many financial companies maintain a strong presence in the state.

4 (tie). Illinois, April 25
Illinois closely resembles its peer Massachusetts, with a 5% flat income tax rate and the same 6.25% sales tax. A higher corporate rate offsets slightly lower property taxes, although corporate taxes didn’t stop Boeing from relocating its corporate headquarters to the state from Seattle more than a decade ago. A gasoline tax that’s in the top five in the country helps push its overall burden higher.

3. New Jersey, May 4
As we get to the three most heavily taxed states, rates for various taxes go up considerably. New Jersey boasts a top income tax rate of nearly 9%, sales taxes of 7%, and property taxes averaging more than $2,800. In addition, with a high concentration of businesses, corporate tax collections are also among the highest in the nation.

2. New York, May 6
New York‘s tax rates are actually lower than New Jersey‘s, with a top rate of about 8.8% and a 4% sales tax. Yet because of the high average income of New Yorkers, the state collects more in income tax revenue than any other state. Most cities tack on an average of nearly 4.5% in additional sales taxes, and with plenty of high-income businesses calling New York home, including Wall Street‘s most profitable institutions, the state’s corporate tax brings in the second most revenue of any state.

1. Connecticut, May 13
Again, tax rates don’t tell the whole story for Connecticut, with a modest 6.7% top income tax rate and just over $2,500 in property taxes. But high gasoline taxes combined with the 6.35% sales tax, as well as high average incomes resulting from its proximity to the New York City metropolitan area, make Connecticut the costliest state in the U.S. for taxes. The state is a center for the insurance industry, with Hartford Financial among the leading employers, and defense-related companies United Technologies and General Dynamics also have substantial operations there.

Think twice about where you live
It’s important to remember that the Tax Foundation‘s calculations are all based on aggregate measures, and they won’t necessarily reflect your personal Tax Freedom Day. But as a general rule, choosing where to live can make a big impact on your total tax liability, and while taxes aren’t necessarily the most important factor in making that choice, they definitely deserve at least some consideration.

Boeing’s choice of Illinois for a headquarters doesn’t change the fact that the aircraft-maker has a huge opportunity in front of it. But the 787 Dreamliner debacle has some wondering

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There’s nowhere you can go in the United States to escape taxes entirely. But where you live can make a big difference in when you can declare independence from your tax burden every year.

Tax Freedom Day is an easy-to-understand concept that the nonprofit Tax Foundation has developed to help people understand just how much they have to pay in federal, state, and local taxes. By taking the total amount of taxes that people have to pay and then dividing it by their income, you can figure out what percentage of the year you spend working for Uncle Sam and your state and local tax authorities.

This year, Tax Freedom Day for the nation as a whole falls on April 18. But people in some states will have to wait quite a while longer before they’ve paid off their tax burden for 2013. Here are the seven most heavily taxed states in the U.S., along with a brief explanation of what makes their taxes so much higher than the rest of the country.

7. Minnesota, April 23
Minnesota has a relatively high combination of individual income and sales taxes, with a top income tax rate of 7.85% and a 6.875% sales tax. But its corporate income tax of 9.8% is especially high, despite the fact that top private employer Target is headquartered in Minneapolis. Even relatively low property taxes averaging just over $1,400 aren’t enough to give residents much relief.

6. California, April 24
California is notorious for having retroactively raised its income tax rates on high-income taxpayers last year, imposing a top rate of 13.3%, the highest of any state. State sales taxes of 7.5% and a fairly high corporate income tax rate also add to Californians’ tax burden, even though it hasn’t stopped many high-profile technology companies from calling the state home. Limitations on property tax increases have kept many residents from bearing the full burden of skyrocketing property values during the housing boom.

4 (tie). Massachusetts, April 25
Massachusetts has a relatively low flat income tax of 5.25%, but a recent increase in its sales tax to 6.25% boosted overall revenue. With property taxes averaging nearly $2,000, homeowners get a triple tax burden, although many financial companies maintain a strong presence in the state.

4 (tie). Illinois, April 25
Illinois closely resembles its peer Massachusetts, with a 5% flat income tax rate and the same 6.25% sales tax. A higher corporate rate offsets slightly lower property taxes, although corporate taxes didn’t stop Boeing from relocating its corporate headquarters to the state from Seattle more than a decade ago. A gasoline tax that’s in the top five in the country helps push its overall burden higher.

3. New Jersey, May 4
As we get to the three most heavily taxed states, rates for various taxes go up considerably. New Jersey boasts a top income tax rate of nearly 9%, sales taxes of

From: http://www.dailyfinance.com/2013/04/13/these-7-states-get-taxed-like-no-others/

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The 7 States With No Income Tax

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By Dan Dzombak, The Motley Fool

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There are seven U.S. states with no income tax, yet a life of paying less taxes isn’t as simple as picking up and moving to one of them. You should take into consideration how each state makes money, and also local taxes.

The 7 States With No Income Tax

  1. Alaska
  2. Florida
  3. Nevada
  4. South Dakota
  5. Texas
  6. Washington
  7. Wyoming
     

While these states have no income taxes, they fund themselves through other taxes including property taxes, corporate taxes, and sales taxes. If you are considering moving, you should consider all the taxes in a state and how those will affect your particular situation.

How states make money with no income tax
Let’s go through the states with no income tax one by one using the Tax Foundation’s most recent data, which is for 2010. The Tax Foundation has been collecting data on taxes since 1937 and its data takes into consideration an average of both state and local taxes.

1. Alaska
Alaska is known for its pristine wildlife as well as its oil and gas resources, most notably its North Slope with the famous Prudhoe Bay oil field. Alaska funds itself with royalties from oil and gas production as well as a 9.4% corporate income tax rate. In 2012 oil and gas royalties made up 83% of the state’s revenue and oil and gas corporate income taxes made up just under 8% of revenue. The state has no sales tax but local municipalities have varying sales taxes and property taxes. In 2010, per capita property tax was $1,865, and combined with all other taxes, the per capita state and local tax paid was $3,214 according to the Tax Foundation.

Those 65 and over should note that Alaska exempts senior citizens from the first $150,000 of assessed value for property taxes.

2. Florida
Florida is known for its great weather (minus hurricanes), tourism, and snowbirds. Florida funds itself with a 6% sales tax as well as a 5.5% corporate income tax. The sales tax made up 73% of the state’s revenue in fiscal year 2011-2012, with the corporate income tax making up 8.3%.

In 2010, per capita property tax was $1,507, and combined with all other taxes, the per capita state and local tax paid was $3,728 according to the Tax Foundation.

3. Nevada
Nevada is obviously best known for gambling and tourism. The state funds itself through a 6.85% sales tax. In the 2011-2012 fiscal year, sales and use taxes made up 71% of the state’s revenue. The state has no corporate income tax, which has helped it attract tech companies and start-ups from high-tax California. Many companies take advantage of the lack of a corporate income tax, and Las Vegas in particular is attracting start-ups through the efforts of Zappos’ CEO Tony Hsieh’s DowntownProject. In 2010, per capita property tax was $1,297, and combined with all other taxes, the per capita state and local tax paid was $3,297 according to the Tax Foundation.

4. South Dakota
South …read more

Source: FULL ARTICLE at DailyFinance

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Fewer U.S. Taxpayers Expecting Refunds This Year

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By CNNMoney

income tax refunds taxpayers

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Fewer Americans are expecting the financial boost of a tax refund this year. In an American Express survey of roughly 1,500 adults, 59 percent of respondents said they expect a refund check this year, down from 64 percent last year.

At the same time, 19 percent expect to owe money come tax time, compared to just 13 percent in 2012. And nearly 30 percent of respondents with a household income greater than $100,000 said they expect to owe the IRS this year.

The growing number of people who owe taxes is likely a sign that the economy is improving, said Will McBride, chief economist at the Tax Foundation, a nonprofit research group.

“They are earning more and that means they get less from the IRS,” he said.

Of those who will owe money, most said they would pay with cash from their checking or savings account. But nearly 15 percent said they would pay with a credit card, up from 7 percent last year.

Of those expecting a refund, 37 percent plan to use it to pay down debt or bills, while 26 percent plan to save the money. Only 28 percent said they expect to spend their refund check on themselves or family, travel, home improvements or a big-ticket item.

“The mentality from the recession is still there,” said Melanie Backs, an American Express Co. (AXP) spokeswoman. “While people are feeling more confident, they learned some valuable lessons.”

The coveted refund checks, which averaged about $2,700 last year, should come in handy as consumers deal with smaller paychecks after a two-year payroll tax “holiday” expired this year.

Pennsylvania resident Kelly Benedetti said she and her husband would love to spend their expected tax refund on travel abroad. But instead, Benedetti, 32, and a research scientist with a doctorate in educational research from the University of North Carolina at Greensboro, said she will put the extra cash, which she estimated will be less than $1,000, towards her student loan debt from graduate school.

“Nine years in higher education really gets you,” she said.

A newlywed and new homeowner, Benedetti said she was surprised to be receiving a refund at all because she aims to pay the exact amount of taxes she owes throughout the year to avoid giving “an interest-free loan to the government.”

“I just don’t understand how people want these huge giant refunds,” she said. “It means they’ve overpaid all year.”

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Source: FULL ARTICLE at DailyFinance