Archives For states

New Hampshire: “Live free or die.”

As the only state without a sales or income tax, New Hampshire appears to live up to its motto.  But the state still has a functioning government and department of revenue, so the question bodes: Is New Hampshire a model for a tax-free society or is it just disguised as one?

First, let’s see how New Hampshire stacks up to other states, 1st being the best, 50th being the worst.

In a CNBC measure of competitiveness, developed with input from business groups including the National Association of Manufacturers and the Council on Competitiveness, states received scores based on 10 broad categories relevant to living and doing business there.  Here’s How New Hampshire ranked:

Overall Cost of Business Workforce Quality of Life Economy Infra & Transp. Tech. & Innovation Education Business Friendliness Access to Capital Cost of Living
19 35 44 1 34 46 26 8 2 19 40

Overall, New Hampshire ranked slightly above average.  On the good side, they scored first for quality of life and second for business friendliness.  On the other hand, they are in the bottom 10 for cost of living and near last in infrastructure/transportation – both of which could be the result of a crippled revenue stream.

Now, about all of this no tax stuff.  If you thought New Hampshire had no taxes period, you’re mistaken.  In fact, other states actually have smaller tax burdens when considering income, property, sales and auto taxes together.  In a report on major tax burdens for the largest city in each state, Manchester, New Hampshire ranked 31st for a hypothetical family of three earning $50,000/year.  The cumulative tax rate for this family was estimated to be 8.8%, just a few ticks lower than the national median of 9.4%.

Below is a list of all New Hampshire taxes:

So it’s not that New Hampshire doesn’t have taxes, they’re just better at hiding it.  Their property tax, for example, is the third-highest in the country.

Here’s another piece to the puzzle:  One reason New Hampshire can afford it’s modestly low tax rates to begin with is because their citizens are some of the wealthiest in the country.  According to data from the US Census Bureau, the 2008-09 average median income in New Hampshire was the highest in the country at $68,187.  In 2010-11, that figure dropped to $67,308, but was just a couple hundred dollars behind Maryland’s top national average of $67,551.

With higher incomes, overall tax rates can be lower; however, note that the state’s revenue per capita is still modest, according to the National Tax Foundation.  In 2011, New Hampshire’s revenue per capita was $4,746 – the 40th lowest and below the national average of $5,323.

In sum, New Hampshire’s overall tax burden is relatively low, but because their population has above average income and auto and property taxes are high, taxes paid per capita are normal, allowing the government to function without collecting sales or income tax.

200px-Free_State_Project_Logo.svgOne more thing: New Hampshire relies heavily on tourism as a source of revenue.  While there is no uniform sales tax, the state does collect tax on certain items including restaurant food, gasoline and hotel rooms – all things that tourists spend a lot of money on.

The tax portrait of New Hampshire isn’t as libertarian as its made out to be, but that doesn’t stop its attraction to some of the most die-hard anti-tax people in the country.  As the Free State Project, an “enthusiastic legion of libertarian activists,”  says, “choose New Hampshire, where freedom happens first.”

If you want to learn more about New Hampshire’s libertarian culture and vision of a no-tax society, consider attending the annual Porcupine Fest this summer.   Continue Reading…

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JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

Property Tax Facts

August 21, 2012 — 1 Comment

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The Supreme Court ruling on the constitutionality of the health care act, known as the Patient Protection and Affordable Care Act of 2010 if you’re into formal titles or Obamacare if you’re a bit more casual with legislative nomenclature, continues to reverberate.

The high court’s split decision stating that the individual mandate is OK, but states can’t be forced to participate in the health care law’s expanded Medicaid program is causing problems for some states on both political and financial fronts.

The Medicaid expansion is expected to extend coverage to roughly 15 million low-income people. But that number will be lower if states opt out of the expansion.

Two states at the forefront of the opposition are Texas and Florida, whose governors have already announced their non-participation plans. So have the leaders of Louisiana, Mississippi, South Carolina and Wisconsin.

Both Rick Perry (Texas) and Rick Scott (Florida) are adamant that although Uncle Sam initially will pick up the full Medicaid expansion tab, as the program costs transition to the states it will take billions from each state’s bottom line.

However, many hospitals and medical associations disagree with the governors. Texas and Florida are two states that rely heavily on property taxes and county leaders are worried because they don’t have an individual income tax.

In Texas, several local leaders, health policy analysts and officials at urban hospitals across the state say that Perry’s rejection of federal billions in Medicaid expansion would hurt county taxpayers and the hospitals they support, forcing them to continue to pick up much of the tab for treatment of the uninsured.

Compounding the local tax collectors’ fears is a recent report from the Rockefeller Institute of Government that found local governments and school districts nationwide already are facing “a serious fiscal crunch accelerated by weakness in property tax collections.

The public policy research arm of the University at Albany, N.Y., says that local property taxes declined by 0.9 percent in nominal terms in the first quarter of 2012, after two consecutive quarters of growth.

But when adjusted for inflation, local property taxes actually declined by 2.8 percent in the first quarter of 2012, marking the sixth consecutive quarterly decline in real collections, according to the report.  It is particularly acute in states that have experienced the largest declines in housing prices. Florida is one of those states with a hard hit housing sector.

Will the anti-Obamacare governors hold firm? Will the economy pick up enough at all levels to help counties replenish their accounts?

Since the Medicaid provisions, as well as the associated health exchanges, don’t kick in until 2014, states could change their minds. And some governors are waiting until after Nov. 6 to decide since a change in the White House will mean a change in the health care law.

If Obama is reelected and his signature piece of legislation goes forward, when the feds start doling out billions to bring more Americans into the Medicaid program, Perry, Scott and the other opposing state leaders will likely be on board.

Governors, regardless of their political affiliation, are like the rest of us. We all find it awfully hard to turn down money.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

Every state has a separate policy on tax exemptions for estates and inheritances. In 2012, the disparity between exemptions for each state will increase, resulting in states that may impose more financial burden on a deceased’s loved ones. The federal estate tax exemption has increased $5 million on January 1, 2012. However, state levies are increasing and decreasing on a case-by-case basis, which may leave families feeling better or worse about their current living situations.

22 states (including the District of Columbia) have already imposed estate and/or inheritance taxes on individuals. Maryland and New Jersey impose an estate tax and an inheritance tax. Maryland imposes an estate tax of up to 16% above a $1 million exemption. In addition, any asset left to a niece, nephew, friend or partner has a 10% inheritance tax attached to it. However, this does not apply to immediate family members (children, grandchildren, parents, siblings, spouse). Six states levy at just the inheritance tax, which is based on the extent of relationship between the heir and the deceased and the tax implications of the inheritance.

In 2012, Illinois will raise their estate tax exemption to $3.5 million, which is a $1.5 million increase from 2011. Whereas, Connecticut is doing the exact opposite; the estate tax exemption will be $2 million, which is a $1.5 million decrease from 2011. Ohio will abolish their estate tax on January 1, 2013, which will leave New Jersey with the lowest estate tax exemption of $675,000.

Many states are revamping their revenue sources to accommodate for any changes in the economy. Thus, it is highly advisable to research where you are living and prepare an estate plan to ensure financial stability following death. J.D.Katz, P.C. can assist you in these matters with highly trained professionals and an extensive knowledge of state and federal taxes.

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