What You Need to Evaluate Before You Move to a Zero Federal Income Tax State
Do you know in America there are seven states where people don’t pay federal income state? 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. Before you start packing and sending a work transfer letter, you need to consider different things. You will aim to see if you enjoy any significant savings when you no longer pay the income tax. Below are the crucial items you need to examine before you relocate.
The no income tax states are great for young people who are starting their career and promote growth. Early on in your career, you have to work hard to pay the student debts. You may be in a difficult financial position despite having secured employment when most of your money goes towards student debts and the federal income taxes. Hence, you should explore ways you can avoid paying the federal income tax legally. Thus, the money that you don’t pay income tax can be used to clear your student loans fast. 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. Therefore, although no money is directly deducted from your paycheck as tax, you will pay more taxes for buying basic goods. Thus, due to the high taxation on commodities and properties, the cost of living in the no-income-tax states may be high. Hence, you may receive more money, but you will end up spending money to purchase basic commodities.
You should also know that income tax is progressive while sales tax is regressive. The government charges the income tax depending on the total money you earn. Hence, people with a high income pay more than the ones with a low wage. With the sales taxes you end up paying the same rate despite having huge differences in the amount your earn. 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.
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