While we wait for Congress to reconvene next week and start dealing with the impending return of higher federal income tax rates -- OK, quit laughing. It could happen; the Congress doing something, I mean. -- I thought it would be interesting to look at states that already substantially tax their higher-earning residents.
Forbes put together a nice slide show on just that topic. According to the magazine, the 10 jurisdictions -- and I have to use that term since the list includes a non-state, the District of Columbia -- with the highest personal income tax rates are:
- Hawaii: 11 percent on incomes exceeding $400,000 per couple, $200,000 for single filers
- Oregon: 11 percent on incomes exceeding $500,000 per couple, $250,000 for single filers
- California: 10.55 percent on incomes exceeding $1 million
- Rhode Island: 9.9 percent on incomes exceeding $373,650
- Iowa: 8.98 percent on incomes exceeding $64,261
- New Jersey 8.97 percent on incomes exceeding $500,000
- New York: 8.97 percent on incomes exceeding $500,000
- Vermont: 8.95 percent on incomes exceeding $373,650
- Maine: 8.5 percent on incomes exceeding $39,549 per couple, $19,749 for single filers
- Washington, D.C.: 8.5 percent on incomes exceeding $40,000
In the states where wealthier taxpayers are specifically targeted with surcharges, the taxes are popularly (or unpopularly if you're subject to them!) known as Millionaires' Taxes.
And In the article that accompanied the slide show, Forbes reporter Ashlea Ebeling looks at the possibility of Washington state instituting its own millionaires' tax.
Taxing the rich in the Pacific Northwest: The Washington state tax hike proposal will show up on the November ballot as Initiative 1098.
If it passes, it would assess a new 5 percent tax on taxpayers with income of more than $200,000 as a single filer or $400,000 for a couple filing jointly.
Evergreen State residents who make more than $500,000 as a single filer or $1 million as a jointly filing couple would face a state income tax rate of 9 percent.
According to tax expert interviewed for the Forbes' story, the Washington initiative has a legitimate chance of approval, in part because it also includes a 20 percent reduction in real estate taxes, which every property owner hates.
Jamie Yesnowitz, a senior manager in Grant Thornton's state and local tax group in Washington, D.C., says the effort to pass Initiative 1098 "is tailored to encourage the vast majority of Washington [state] voters to support a tax that would not be imposed on them."
Or, as it's known in the tax world, the old "behind the tree" strategy, based on the famous quote by the late U.S. Sen. Russell B. Long (D-La.): "Don't tax you, don't tax me, tax that man behind the tree."
One of 1098's supporters, however, isn't hiding behind a tree. Bill Gates, a wealthy lawyer in his own right and father of software magnate, Washington resident and gazillionaire BG3, is bankrolling the effort to institute Washington's first-ever personal income tax.
There's no word on where Microsoft's younger Gates stands on the tax referendum.
Where can you go? If you're a wealthier Washington resident and Initiative 1098 passes, you might want to consider moving to a state that doesn't have a personal, wage-based income tax.
In addition to, for now, Washington, they are Alaska, New Hampshire, Tennessee, Florida, South Dakota, Nevada, Texas
Remember, though, that states usually have other ways to get to your money.
Some tax source income, regardless of where it eventually ends up (such as Georgia, about which I've ranted posted before). Others (California, Connecticut, Nebraska,
Rhode Island and Vermont) tax all retirement money.
So maybe the best answer is to stay put and hire a good financial planner and tax adviser to help you minimize the taxes where you like living.
- California millionaires' tax is legal
- Hawaii becomes a tax paradise lost
- State taxes on the rise
- 'Tax us more,' say some rich Americans
- Taxes, wealth and relativity
- Don't hate me because I'm rich
- N.J. got it right: We hate property taxes
- This is why I hate ballot referenda
- State Tax Departments
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