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. Maybe you are already thinking about all the things you can do with the money you keep when you don’t get any income 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. Early on in your career, you have to work hard to pay the student debts. 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. 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.
It is wise to learn that states with no income taxes charge higher rates for other types of taxes. You will be excited by the thought that you will be getting all your money with no income tax when you move to this state. Know that these no income tax states have governments that need money. Therefore, although no money is directly deducted from your paycheck as tax, you will pay more taxes for buying basic goods. 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.
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. 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. Thus, even if you are poor, you pay equal taxes when you purchase a product as a rich person does.
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.