Alabama overall tax burden lightest in south

The Oxmoor Valley Ridge course (par 4 3rd hole shown), part of the Robert Trent Jones Trail, is just a few miles from the interesting and sophisticated city of Birmingham.  Alabama imposes the second lowest tax burden in the nation on its residents.    

 

    It seems fitting on this July 4th to reference independence from taxation, or at least the kind of taxation that came without representation.  The Colonists in 18th Century America were more upset about being told they had to pay taxes to the Crown, without having any voice in the matter, than about how much they had to pay (which is reported to have been much lighter than our own burdens today).
    Some might say the English Crown's role of absolute authority over taxation in America has simply been transferred over time to the IRS.  Regardless, Americans

remain obsessed about both the principles of taxation -- where does all that money go, anyway? -- and the amounts we pay.   There isn't much we can do about Federal taxes, so local taxes tend to guide our decisions about where we are going to live, especially if we are on the cusp of our retirement years.  A retired CEO of my former corporation, for example, established two domiciles for his retirement -- one in New Hampshire and one in Florida.  Neither have a state income tax, something important for a guy who was going to make hundreds of thousands of dollars each year from his retirement plan.  (Note:  New Hampshire taxes income on investments but Florida doesn't; guess which state he claims as his primary residence?)   
    Most of us do not have a retired CEO's financial planning resources or as much to lose to taxes, but that doesn't make the investigation any less important.  But a word of caution:  Income taxes should not be the only kind of tax we look at when considering where to live.  If it were, we would all live in Florida, Texas, Tennessee, Nevada or one of the other dozen or so states that don't assess their citizens an income tax.  No, a state's overall tax burden, and the way we plan to live our lives, should guide one of the most important decisions of any person's or couple's life.  If you plan to own an expensive house in retirement, property taxes will play an important role.  If you are aggressive consumers, beware the high sales-tax states.  Planning to live in a remote area where you will rely on your car for daily trips to town?  Gasoline taxes vary widely state to state.
    There are a number or resources to determine the overall tax burdens on a state-by-state basis, but one I find particularly useful is at MSN's Money Central web site, under the title "Best and Worst Tax States."  MSN rolls up all the various taxes into one overall tax burden rate by state.  For example, Florida ranks #12 (#1 is worst, #50 best) on the overall list; I am chagrined to admit my own state of Connecticut ranks #1.  The other no-income-tax states in the southern U.S., Texas and Tennessee, rank #41 and #46 respectively, explaining somewhat why both these states are showing net population inflows. 

    Oklahoma, not known as a retiree destination, ranks #50, just ahead of Alabama, which I have visited and where I reviewed a few courses along the Robert Trent Jones Trail (to find them, search by "Alabama" in the box at upper right).  If taxes are your major concern, the growing state of Alabama is worth a look (I found the city of Birmingham sophisticated and surrounded by excellent private and public golf courses).
    Lost in all these lists of tax rates and financial calculations, of course, are quality of life considerations.  Ask a West Palm Beach, FL, couple sitting in bumper to bumper traffic on the way to the early bird special, and they might admit that, for a few dollars more, they would pay to see the local roads widened.       

Florida levies no state income tax, so it must make up for that with taxes on property such as homes and boats like these at Queens Harbour, near Jacksonville.

 

-- Article and photos by Larry Gavrich