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Considering Moving to a No Income Tax State? Here are Key Things to Know
Are you aware of the seven states in America where people pay zero federal income tax? It may therefore seem like a good idea to relocate to these states. The reason is that you will enjoy significant savings from your income when you have zero tax deductions. However, before you rush to make any decision to move or not to it is wise you consider all facts. The goal is to objectively review things and see if it is truly an economic decision to relocate to a no income tax state. Below are the crucial items you need to examine before you relocate.
If you are a young person who is looking for his or her first job, then you may consider moving to no federal income tax state. To complete the education, you may have borrowed money which you will immediately start paying when you get your first job. Therefore, you should look for ways to minimize the deductions on your paycheck. It is therefore wise you find work in one of the states where you are not charged any income taxes. You can therefore use this surplus money to pay off the student debts quickly. It is also relatively easy for young people to relocate than individuals who have bought homes in other states and have families.
You should be prepared to face other taxes when you move to a state with no federal income tax. It is enticing to imagine earning, and you don’t have to pay taxes. The challenge, however, is that the government needs to generate revenue by collecting taxes. Hence, these states have implemented alternative ways to tax you without deducting the money from your paystub. Thus, due to the high taxation on commodities and properties, the cost of living in the no-income-tax states may be high. It is therefore wise you review this issue before you rush to relocate to one of these seven no income tax states.
It is also wise to know the federal income tax is meant to the progressive and minimize regressive taxation. Your income level determines the total amount of money that is deducted as tax. Therefore, if you earn a low income, you will pay fewer taxes than a person with a high salary. The drawback of sales tax is that it does not consider that people earn different incomes. Thus, even if you are poor, you pay equal taxes when you purchase a product as a rich person does.