I ran across two interesting lists showing how politicians at the state and local level are often just as bad as the ones in Washington, DC. First, Forbes has an article identifying the 10 states with the highest income tax rates. The top rate is a big deterrent to entrepreneurs and investors, but it’s also important to look at the income level where the top tax rate takes effect. Yes, Hawaii, Oregon, and California have terrible tax policy, but Iowa, Maine, and Washington, DC, deserve special scorn for raping the middle class.
Hawaii: 11% (income over $400,000 (couple), $200,000 (single))
Oregon: 11% (income over $500,000 (couple), $250,000 (single))
California: 10.55% (income over $1 million)
Rhode Island: 9.9% (income over $373,650)
Iowa: 8.98% (income over $64,261)
New Jersey 8.97% (income over $500,000)
New York: 8.97% (income over $500,000)
Vermont: 8.95% (income over $373,650)
Maine: 8.5% (income over $39,549 (couple), $19,749 (single))
Washington, D.C.: 8.5% (income over $40,000)
Looking at the other major source of revenue for state and local governments, the Tax Foundation identifies the cities with the highest total sales tax rate – a number that often includes three separate levies by state, county, and city governments. Here are the top 10. Or should I say worst 10?
Birmingham AL 10.000%
Montgomery AL 10.000%
Long Beach CA 9.750%
Los Angeles CA 9.750%
Oakland CA 9.750%
Fremont CA 9.750%
Chicago IL 9.750%
Glendale AZ 9.600%
Seattle WA 9.500%
San Francisco CA 9.500%
One thing that stands out is that California is on both lists, which helps explain why the state is such a basket case. Seattle deserves a special mention because at least there is no state income tax in Washington.
Last but not least, it’s worth mentioning that there’s no sales tax or income tax in New Hampshire. Live Free or Die!
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Washington has a gross receipts tax, where, depending on what line of business you’re in, you pay a percentage of your revenue (not profit) to the state. It’s like the VAT only worse since:
* the different rates for different industries opens the door to massive lobbying and regulatory capture… zero-rating certain categories of products is nowhere near as prone to regulatory capture
* while intermediate steps of the chain can deduct the VAT paid from VAT collected (thus preventing compounding of tax rates), gross receipts taxes compound (at the normal 0.484% rate if something goes through 5 steps, the effective tax rate becomes more than 2.44%)
IMO, the ideal form of taxation (accepting that some form of taxation is necessary) is to tax a flat percentage of assets (probably assessed at purchase cost), with perhaps an exemption for the first $n. It avoids taxing productivity (and indeed incentivizes maximal productivity) and cannot be regressive (since at any tax rate less than 100%, the property owner is essentially always able to pay). Further, in a libertarian state, where the role of government is limited to defense of property rights, I think it only makes sense for those who receive greater benefit (which is to say those with more assets) to pay more… in such an environment, it makes it more of a user fee. It can even theoretically be made optional, with the proviso that not paying forfeits recourse to the police and courts to protect the asset.
Wow, in light of all the other taxes, NH doesn’t look so good after all. Sounds like all the other taxes more than make up for a lack of income and sales tax. What we need is for people to get into the habit of quoting ALL relevant taxes when talking about tax rates. Otherwise, we just allow the politicians to keep up the charade. Personally, it drives me crazy when people only talk about income taxes, as if that’s all there is.
NH’s liberal governor and legislature has raised taxes almost 100 times in the last 4 years.
We are left with the $300M deficit.
Time to take NH back for the adults.
Property tax rates are generally substantially higher in New Hampshire than in Massachusetts.
NH does charge:
* 5% on interest and dividend income
* 10% on all gambling winnings
* 8.5% on profits from doing business in NH (kicks in if a business does $50k a year in sales)
* 0.75% on business “enterprise value” which is the sum of all employee compensation, interest, and dividends paid or accrued in a year, subject to adjustment and apportionment (kicks in at $150k a year in sales or $75k a year in “enterprise value”)
* 7% on all two-way communications services (phone or internet service)
* $.00055 per kilowatt-hour of electricity consumed (including self-produced)
* 9% tax on restaurants and hotels
* 1.5% on real estate sales (half each paid by buyer and seller)
In states with no income taxes and/or no sales taxes, how are the other taxes? (Property tax seems to be the most likely one to be used in their place).