Low Tax States Aren't Always Low Tax
0% Headline, Lots of Money All In
One thing I hated about living in Illinois was that I was taxed to death. Every time you turned around, you were paying a tax. When I visit my daughter and go to the grocery store, I get stuck with the Rahm Emanuel ten-cent bag tax. As if I am going to juggle all my goods down the street when I leave. People bring their own bags, but they can have listeria. Today in Las Vegas, I went to the grocery store, and the virtue signalers brought their own bags even though we thankfully don’t charge a bag tax. Some of them were wearing masks.
I own two small fishing cabins in Grand Marais, MN. It’s a rural town. Like a lot of small towns across America, the draconian and bad Covid policy crushed them. The state of Minnesota taxes everything, and the local governments tax it again. The level of taxation is strangling the town. It used to be a pretty cool place, but instead of capitalistic small businesses starting up, they are going out of business. It’s just too hard to make it. The local government never met a budget that it couldn’t increase (instead of cut), so it is forced to raise property taxes continually. In town now, every business is charging 3-4% extra if you use your credit card. I am thinking of paying by check.
Illinois is going to start taxing services. Illinois is supermajority Democratic. I mentioned to my accountant that he might want to open up an office because I am not paying Illinois sales tax on my accounting bill. If Nevada goes supermajority Democrat in the next election cycle, I am going to have some decisions to make.
I thought about this when I saw all the new taxes Washington state was going to pass. My friend and I used to joke that we should move to the border of Washington and Oregon. Live in Washington (0% income tax) and shop in Oregon (no sales tax).
When I started looking at leaving Illinois, taxes were a big part of the calculus. Quality of life, airport, and other things were important too. But you don’t leave Illinois to go to a state like California when you are trying to minimize taxes. When you do the all-in tax math, Illinois is very close to California when it comes to taxes. The largest difference in cost between the states is the cost of gasoline and real estate. Groceries are cheaper in Cali. The weather is better in Cali. Cali is more scenic.
Washington state has a supermajority Democrat legislature with a Democrat governor. They can pass anything they want. I have several friends who abandoned Washington for Nevada. They passed a tax on capital gains because they couldn’t pass an income tax. Instead, they are taxing everything else. I played golf once with a Democratic State Senator from Washington, and when asked what his largest accomplishment was, he told me it was passing a payroll tax to fund a special interest group. Funny thing, they still don’t have enough money. Imagine that. Here are some taxes the Democrats in Washington passed.
⚠️HB 2049 | Property tax spikes: 55% increase of local school district property tax levy authority.
⚠️SB 5801 | Gas and transportation taxes: Increases in gas taxes, additional license fees, and more.
⚠️HB 2081 | Business tax increases: Across the board business tax increases and additional punitive business tax surcharges on certain industries.
⚠️SB 5814 | Sales tax expansion: Applies sales tax to critical business services including temporary staffing, digital services, security services, and applies tobacco taxes to nicotine products.
⚠️SB 5813 | Capital gains income and death taxes: Increases tax rates for the capital gains and estate taxes.
⚠️HB 2077 | Tesla tax: Punitive excise taxes on the sale or banking of zero-emission credits held by Tesla.
⚠️SB 5794 | Eliminating tax incentives: Eliminates tax preferences for gold and bullion, low-income energy credits, and storage spaces.
⚠️SB 5390 | Discover Pass: 50% hike in the cost of a Discover Pass.
⚠️SB 5583 | Hunting and fishing licenses: 38% fee increase for a hunting and fishing license.
⚠️SB 5083 | Insurance premiums: Shifts health care costs from state employees to working families ($1,400 per year/family of four).
⚠️HB 2061 | Concession fees: 10% tax on duty-free stores.
⚠️SB 5786 | Liquor license fees: Significant increases in the cost of liquor licenses for grocers, restaurants, bars, and more.
⚠️HB 1858 | Document recording fees: Applies document recording fees to substitutions or assignments of deeds of trust.
⚠️HB 1488 | Another property tax increase: Conservation district property tax increase.
⚠️HB 2015 | Another sales tax increase: Local sales and use tax increase.
⚠️HB 1392 | Another insurance premium increase: Additional taxes on private health insurance.
⚠️HB 2003 | Another fishing license increase: Enhanced fee on salmon fishing.
The Tax Foundation calculates the all-in cost of taxes by state. No surprise, red states have less tax. No surprise, people are leaving blue states and moving to red states. No surprise, blue state governors are lying about the flight. The flight is creating small business opportunities. Here are the ten best states for taxes:
Another sneaky tax states apply is the Unemployment Insurance tax. They have to participate in the federal unemployment program. But, they are free to figure out how much they want to tax. Nevada has a 0% income tax, but a high UI tax, which is essentially a tax on income. Would be nice to see it decreased. As a retired guy, I don’t have to deal with it but I feel empathy to businesses who do.
They always get you somehow. Texas has high property taxes, and 0% income tax. I looked at Texas, but the property taxes were killer. Not good for a retiree. Not surprisingly, many of the states with low all-in tax rates are cold weather states. Wyoming, the Dakotas, Alaska, Montana, New Hampshire, and Indiana all have real winter.
States that rely on sales taxes instead of other taxes are smart. People are free to choose when they want to be taxed. The United States should do that too, and scrap every other tax it levies.
I wasn’t surprised Florida was looking at doing away with their property tax. DeSantis has been a damn good governor. Florida property taxes are already low. I think it’s a good idea. Taxing property impacts the value of property. See states that have low property taxes like California compared to ones with high taxes like Illinois, NJ and Texas. Real estate appreciates faster in low property tax states.
The other thing we are seeing is in many high tax states, economic growth is slowing. Wirepoints has been on this regarding Illinois. In my state, people are worried about an economic slowdown on the Strip. The corporatization of the Strip has turned hotels into price-discrimination meccas. They know how to mine cash out of customers starting with high resort fees. They learned from Disney. In an economic slowdown, it will be interesting to see what happens.
Look at this graphic on cities. Given what is going on recently in Washington, I might short Seattle.
When you stop growing, you die. GDP growth is everything when it comes to cities, states, and countries. Abundance, not restrictions.
When you think about opportunity, it all depends on what you want to do with your life. I’d say this. If you want to be a billionaire, the easiest way to do it is via tech or finance. Given those two avenues, San Francisco and New York reign supreme. That is, even though they are expensive and heavily taxed. But opportunity is there.
Unfortunately you have to figure in more than taxes to gain a full understanding of living costs. I will never forget when I called USAA to tell them I was moving to South Florida from northern Virginia 10 years ago. The lady on the line said please don't get angry at me but you car insurance is going to more than double...and it did. Homeowners insurance has been and continues to be an issue with exorbitant rates for windstorm coverage and to a lesser degree for flood insurance and with increasing home values this will not change anytime soon. Although the state legislature has tried to address this issue it will remain an issue until a major storm does a direct hit on a major population center.
Taxation is theft. Btw, speaking of MN, tonight im staying at a beautiful campsite on the mississppi river near Hill City on our way from ID to WI. Also recommending stopping for a day in the north unit of Teddy Roosevelt NP. Wish i could post some pics on your comments.