Sunday, May 17, 2009

State Tax Policies Matter

Do you think state tax rates are irrelevant? Maybe that taxing the rich is a great idea? Read this Wall Street Journal article by Laffer and Moore; they show that states with high taxes are hurting economically, while those with low taxes are growing.

You can attribute the success of low tax states like Texas to chance, if you believe in coincidence. As a high-income individual you may have the choice of paying 10% state income tax in California or 0% in Texas. Could you figure out something useful to do with 10% of your income?

I'm of the opinion that the rich get that way, and stay that way, by being smart about money. Many high income individuals, particularly retirees, can choose where to earn their income. A list of the states with no state or local income taxes isn't hard to come by and includes Sun Belt states Florida and Texas.