Are you aware of the seven states in America where people pay zero federal income tax? You may feel like moving to one of these states now. The reason is that you will enjoy significant savings from your income when you have zero tax deductions. Before you start packing and sending a work transfer letter, you need to consider different things. The goal is to objectively review things and see if it is truly an economic decision to relocate to a no income tax state. Continue reading to see key things to evaluate to make an informed decision.
The no income tax states are great for young people who are starting their career and promote growth. 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 may therefore be wise to move to a state where you don’t pay any income tax. 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 with no state income tax and have families.
The other thing to know is that zero federal income tax states have high rates of other kinds of taxation. 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 without income tax have implemented alternative ways to tax you without deducting the money from your paystub. Therefore, the value-added tax you pay when you buy basic goods is extremely high in these states. Hence, you may receive more money, but you will end up spending money to purchase basic commodities.
The other thing is to acknowledge that the income tax is supposed to promote equity. Your income level determines the total amount of money that is deducted as tax. Thus, you are not charged the same tax rate as a person who earns more than you. The drawback of sales tax is that it does not consider that people earn different incomes. Hence, when you purchase a basic commodity, you are charged the same tax as a millionaire if though you are not.
It is therefore wise to objective review these things to know whether it is smart for you to move to no income tax state or not. Visit this website at http://www.dictionary.com/browse/taxes for more info about taxes