Importance of State Taxation in the US - Essay Example

Taxation taxation is an important criterion while deciding about relocating in the other Personal income tax, sales and use tax and property tax are the major taxes that are charged by most of the states. On top of this, local counties and municipalities also charge their own taxes and large variations are found among them. Nevertheless, personal income tax and state sales tax constitute a major chunk of these taxations and those need to be compared thoroughly followed by property and other taxation, if unable to conclude. Arizona Income Tax Personal income tax rate in Arizona is 4.24% for the income between $50,000 and $150,000. On incomes above $150,000 the tax goes up at 4.54%. Sales Taxes Sales and use tax in Arizona is 6.6 percent; however, prescription drugs, and food for home consumption are exempt from sales tax. Municipalities charge 1% to 2% additional sales tax. Property Taxes Arizona property tax rate is 0.66% that is found to be at one-half of the national average property tax rate of 1.32% (Arizona Taxes). Colorado Personal Income Tax All residents of Colorado pay flat rate of 4.63% as personal incomes tax. Sales Tax Colorado state government charges sales and uses tax at 2.9% though it exempts prescription drugs and food items. Over this, many counties and municipalities levy their own taxes and that has been found to be as high as 9.9%. Property Taxes Property taxes are levied at 7.96% of the actual value. Other property is levied at 29% on actual value. A homestead exemption is granted to seniors of age 65 and above (Colorado, 2012). Maryland Personal Income Tax Maryland has different slabs of personal Income Tax rates. For top of the bracket income (over $500,000) applicable tax rate is 5.5%. For the income below $150,000 per year, income tax rate is 5.0% and for the income in between $150,000 and $500,000 the income tax rate is 5.25%. Sales and Use Tax Maryland charges 6 percent sales and use tax. State does not charge any tax on prescription drugs and food sold in grocery stores. Property Tax State does not charge property tax but counties of Maryland do charge property tax and the rate varies between 1.357$ and $ 5.67 per $100 of assessment. Most of the counties charge close to $2.1 per $100 property valuation (Maryland Taxes, 2012). Pennsylvania Personal Income Tax Pennsylvania charges tax on individual income at flat rate of 3.07 percent without providing for any personal exemptions or standard deductions. Sales and Use Tax Pennsylvania levies a 6% state sales tax on goods and services providing exemption to the prescription drugs, clothing, residential heating fuels, textbooks and food items. Local counties such as Philadelphia and Allegheny charge additional 1% of the tax making it total 7%. Property Tax The state of Pennsylvania does not charge taxes on personal property or real estate; however, local municipalities do charge those taxes only on real estate, land or building. The tax is not charged on other kinds of properties such as cars or inventories (Powell, Albrecht). Florida Income Tax Florida is one of a few states that do not charge any income tax on its residents; however, individuals will continue to pay federal taxes as applicable. Sales Tax A minimum sales tax charged in Florida is 6 percent. Besides, state permits each county to charge its own local tax that is applicable over and above state sales tax. Counties in Florida have been found to charge taxes between 6 and 7.5 percents. Property Tax Florida is costliest among all states on the property tax; however, homestead exemptions up to $50,000 can be availed by Florida residents. Homestead exemptions are available to homeowners who stay in the home as primary residence. Florida does not impose gift tax, inheritance tax or intangible personal property tax on the residents. It is worth noting that while buying home in South Florida, closing cost is also a kind of expense that needs to be considered. Closing costs are made of doc stamps that range between $0.60 and $0.70 per $100 (based on county) of the home price. On amount borrowed, mortgage doc stamps charge is at $0.35 per $100. Additional intangible tax charged by county is $0.20 per $100 on borrowed capital (Chapple, Renee). Two major taxation comparisons can be presented in a tabulated form as per the following. Income tax Sales tax Arizona 4.24-4.54 6.6 Colorado 4.63 2.9 Maryland 5.0-5.5 6.0 Pennsylvania 3.07 6.0 Florida Nil 6 After knowing about taxation details for the five states, it is tricky to conclude, which state charges least as it depends upon the host of other factors such as county or city that is chosen in a particular state, income levels that will decide about tax slabs in some states such as Maryland, owned or rented property and so on. When simply compared on the basis of personal income tax, Florida comes out as a clear winner as it does not charge any tax. Maryland is costliest amongst all charging anything between 5 and 5.5 percent on the personal incomes. But when the element of sales tax is added, it tilts the story significantly. It is to be noted here that all the states do not charge sales tax on food items and prescription drugs. In rest of the items, Florida has been charging 6% sales tax which is much higher than the Colorado tax rate of just 2.9%. But lower sales and use tax in Colorado is offset by the charge levied by its counties. In Colorado, local authorities have been charging sales tax as high as 9.9%. While in Florida, most of the counties charge 6-7.5 percent. So sales tax out go is likely to be more or less same in Colorado and Florida but on personal income tax front advantage clearly lies being in favor of Florida. In the state of Arizona, municipalities charge only 1-2% tax on the top of 6.6% state sales tax but the personal income tax is a larger burden when compared with the nil personal tax in Florida and so is the case with Maryland. In this perspective, Arizona and Maryland both are ruled out as none of them are attractive for relocation. Pennsylvania does offer the second lowest personal income tax. Also, both the states have equal sales tax rate of 6%. Pennsylvania offers advantage in taxes charged by local counties as they charge only 1% of the tax against 6-7.5% charged by counties in Florida. The bigger question is that whether this advantage can offset the difference in personal income tax between these two states. Assuming income of $100,000 per year, the income tax burden in Pennsylvania will be $3000. Taking out food item and prescription drug plus essential savings, net consumption will not exceed 50% of the income. That means lower sales tax burden at local level (county level) in the state of Pennsylvania would save almost $3,000 that will just offset the outgo of the same amount by way of personal income tax when compared with Florida. Thus, it is a deuce between Florida and Pennsylvania. This can be sorted out by scrutinizing other taxation particularly Property tax. Pennsylvania does not charge any property tax including real estate while Florida does charge property tax. Closing cost charged within Florida while buying property will be another burden on the residents. This decides that Pennsylvania is a clear winner amongst all states and it will be a preferred state over other states for the relocation from Oregon. Works-Cited Arizona Taxes. Altius Directory. Available at Retrieved June 10, 2012 Chapple, Renee (2012). Florida Taxes. Available at Retrieved June 10, 2012 Colorado (2012). Retirement Living Information Center. Available at Retrieved June 10, 2012 Maryland Taxes (2012). Available at Retrieved June 10, 2012 Powell, Albrecht (2012). Pennsylvania Tax, Available at Retrieved June 10, 2012 Read More