Did you know that there is no sales tax in Oregon, Delaware, New Hampshire, and Montana? Did you also know that there is no State income tax in Alaska, Florida, Nevada, New Hampshire, Wyoming, Texas, South Dakota, Tennessee, and Washington? “How can this be,” you ask?
Part of the beauty in our Constitution (and the intellect of our founding fathers) was providing the power of each individual state to run its own business. And just like running a business, states must generate enough revenue to cover the costs associated with running a state. States also have the power of taxation to pick and choose ‘where’ they derive that income. If they spend more than they make, that’s a whole other topic for discussion.
California, the state of residence for most people receiving this email, has one of the highest (if not the highest) state income tax levels (9.4%), and the maximum rate is hit once income exceeds $48,029 of taxable income—one of the lowest income levels at the highest marginal tax rate! See state tax chart here State Tax Chart to see how your state compares with the rest of the nation. (source: Retirement Living.com) *
If state income tax doesn’t make you mad, then knowing that California is only ½ cent short of having the highest gasoline tax (67 cents per gallon), and DOES have the highest diesel fuel tax (75.9 cents per gallon) in the country might tip you over the edge! See fuel tax charts here API state fuel taxes (source: American Petroleum Institute).* As a diesel truck owner, I’m paying my fair share—ouch!
When you consider our (California) state sales tax range of 7.25% to 8.75% (depending on the City/County) is one of –if not “the”—highest in the nation, you start to ask where all this money is going. And finally, when you consider that our state property tax is assessed at 1% (plus local assessments) of 100% of the fair market value of your property, you’ve officially become sick of taxes!
So why do I dwell on the subject of taxes again and again? If working with a good tax professional, there may be ways to minimize the amount of taxes you pay—legally. While developing a tax-managed strategy with your financial advisor (me) and a tax professional (a CPA or Enrolled Agent) is an essential part of your personal financial plan, paying the minimum amount of taxes you legally owe is a right. It’s also the smart thing to do.
Note: This article is not tax advice, nor is it intended to replace the advice received by a tax professional. Please seek a tax professional for advice on managing your personal tax situation.
*NPC is not responsible for and may not be held liable for the adequacy of the information available on the link(s) provided. The listing of a vendor or product on this/these site(s) does not constitute an endorsement or warranty of the vendor or product by NPC.