Retiring and Want to Reduce Your Tax Burden? Consider These Low Tax States

It is no wonder that Americans are concerned about taxes, especially the 70 million plus baby boomers who are starting to think about retirement, because depending on where you live, you are paying anywhere between 28 and 38 percent of your income in taxes.

While individuals vary in their wants and needs, minimizing state and local taxes should be one of the considerations when planning for retirement. While for a given income, the federal tax bite is uniform across the country, the key to reducing your tax burden lies in minimizing state and local taxes.

The following is a list of the "top ten" highest tax states (state and local tax burdens): Vermont, Maine. New York,. Rhode Island, Ohio, Hawaii, Wisconsin, Connecticut, Nebraska, and New Jersey. They range from 14.1 percent in Vermont to 11.6 percent in New Jersey.

The "top ten" lowest tax states are as follows: Alaska, New Hampshire, Tennessee, Delaware, Alabama, Oklahoma, South Dakota, Texas, Wyoming and Montana. They range from 6.6 percent in Alaska to 9.7 percent in Montana.

What cities do I like in some of the lower tax states? Consider Hanover-Lebanon, NH at 4.5 percent (city tax bite); Oxford, MS and Fairhope, AL (5%); Boulder City, NV, Las Vegas and Covington, LA (all at 6%); San Antonio and Austin, TX at 7.8%; Charlottesville, VA at 8.5%; and finally, Portland, OR at 8.7 percent. All ten cities have state and local tax burdens below the national average of 9.7 percent.

Keep in mind that while moving from the highest tax state (Vermont) to the lowest tax state (Alaska) would reduce your state and local tax burden by 7.5%, moving from New Jersey to Montana would save you less than 2%, and the majority of popular interstate moves would save you even less. So while tax savings can be significant, it is also important to consider other factors like cost of housing.

Warren Bland, PhD (http://www.nextdecade.com) is an award winning geographer at Cal State and author of "Retire in Style, 60 Outstanding Places Across the USA and Canada". He has appeared on Fox News, Bloomberg, CNN and MSNBC and is frequently quoted in national newspapers and magazines throughout the US and Canada.

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