NCPA Online State Tax Calculator Computes Lifetime Benefit of Moving
DALLAS, Sept. 30, 2013 /PRNewswire-USNewswire/ -- Moving from a high-tax state to a low-tax state could save you thousands, even millions, of dollars over your lifetime. Moving in the opposite direction, by contrast, could prove very expensive.
An online, free State Tax Calculator developed by the National Center for Policy Analysis is a first-of-its-kind tool to help people determine just what's at stake. The calculator computes the difference in the amount of federal and state income taxes, property taxes and sales taxes you could expect to pay over the rest of your life when you move from one state to another.
Economic columnist Scott Burns just profiled the NCPA's State Tax Calculator in his latest nationally syndicated newspaper column.
The calculator is based on the most sophisticated planning model available -- developed by NCPA Senior Fellow Laurence Kotlikoff. The model automatically makes saving and investment decisions for the household (including IRA deposits and withdrawals) in order to maximize personal consumption and smooth it out over a lifetime.
"The tax burden in a new state can make a huge difference in your retirement plans," said NCPA Senior Fellow Pamela Villarreal.
Villarreal offered a few examples:
- If a 40-year-old man earning $100,000 a year moves from California to Alaska he will have an additional $4,213 a year to spend every year for the rest his life; the extra income would total $351,700 if saved and left to his children – an amount equal to more than three times his annual income.
- If a 40-year-old woman earning $500,000 a year moves from New Jersey to Wyoming she will have an additional $12,200 a year in spendable income every year for the rest of her life; if the extra income is saved, it would accumulate to more than $1 million over her lifetime.
"Moving to tax-friendly states can make a major difference to your lifetime living standard," said Kotlikoff. "This unique tool considers your income, housing costs, and the three big taxes that matter most to your move -- income, sales, and property taxes."
"The tax impact is much greater at higher incomes," said Villarreal. "High income taxpayers have a lot to gain by fleeing high-tax states. When they leave, the average taxpayer gets stuck with the higher tax burden."
- If a 40-year-old high tech entrepreneur earning a million dollars a year moves from Vermont to Texas, he would have an additional $38,000 a year in spendable income; if saved, the extra income would total $3.2 million by the end of his life.
Inputting the optional housing variables will include median state property tax differences. For instance:
- A millionaire moving from high-tax Iowa to lower-tax Nevada will have an additional $33,000 in extra annual income, and an additional $2.7 million by the end of her life.
- A millionaire moving from Vermont to Wyoming with a $2 million home value will have an additional $55,000 in extra annual income, and an additional $4.6 million by the end of his life.
"We're already seeing some high-profile examples of tax-saving relocations," said Villarreal. "Golfer Phil Mickelson's comments about moving out of California are one example. Another is LeBron James's choice to play for the Miami Heat rather than NBA teams in higher tax states, like New York, Illinois and California."
Although the State Tax Calculator is designed for the average consumer, calculating moves for other celebrities proved interesting:
- If Mitt Romney moves from Utah to New Hampshire he would have an additional $872 a year in spendable income; if saved, the extra income would total $36,122 by the end of his life.
- When Peyton Manning moved from Indiana to Colorado he lost $172,398 a year, an amount that will result in a total loss of $15,197,993 over the course of his lifetime.
- If Jay Leno moves from New York to South Dakota he would gain an additional $93,776 a year; if he saved this extra income, it would accumulate to $4,284,899 that he could leave to his children.
- If Barack Obama moves from Illinois to Hawaii he would lose $5,009 in spendable income each year, resulting in a total loss of $312,402.
The State Tax Calculator is simple and anonymous. You answer a few questions about your current status, pick a state you might consider moving to, and quickly find out what the long range impact will be. You are also able to input information about housing costs – important, for example, if you know you will be moving from a place with high home costs to a place with much lower ones.
Media are invited to try out the calculator to determine how your state's tax burden compares to others.
Scott Burns' column can be found at http://assetbuilder.com/scott_burns/the_moving_experience_of_a_lifetime
The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. We bring together the best and brightest minds to tackle the country's most difficult public policy problems — in health care, taxes, retirement, small business, and the environment. Visit our website today for more information.
SOURCE National Center for Policy Analysis