by Brian Mahany
Recently I read a story in the British paper, the Daily Mail about “tax migration.” I have known that some people are fleeing the United States and renouncing their citizenship but those cases are relatively few. I was shocked to read, however, just how many Americans are moving within the United States to avoid taxes. [Ed. Note - I am getting ready to move to Texas where there are no income taxes. I can easily work from anywhere in the United States. Although I am primarily moving because of the long Wisconsin winters, the idea of eliminating Wisconsin's 7.75% top income tax rate certainly weighed in my decision.]
It appears that many others feel the same way. Tiger Woods claims he moved out of California in 1996 to avoid the state’s high income taxes. With California nearly insolvent and voters there having recently passed Proposition 30 which increases those already high taxes, we expect others may follow suit.
Woods moved to Florida while I am moving to Texas. Both have no income tax.
Those considering a move to reduce taxes should engage a tax planning professional before making the move. Although some states have no income tax, government needs money to operate and that money has to come from somewhere. In some states that means high sales taxes and user fees. (While state revenue commissioner in Maine, I inherited a state with the dubious distinction of having high sales tax, high income tax rates and relatively high user fees. The only saving grace were relatively moderate property taxes.)
Calculating tax burden is easy but the relative tax burdens from one state to another depend on your earnings, value of your real estate holdings, the taxability of retirement monies and your spending habits. That is where a good tax planning attorney can help.
Sometimes people live part-time in two states with the result being that both claim the person as a resident. Where you vote, register your car and obtain a “resident” fishing license can have quite an impact. We know people who tried to declare New Hampshire residency (no income tax) but then “saved” $30 bucks by obtaining a Maine resident fishing license. That attempt to save a few bucks cost them tens of thousands in income taxes and legal fees.
The tax lawyers at Mahany & Ertl have helped many taxpayers with a wide variety of tax needs. From tax planning to audit defense to tax court appeals, we can defend you before a state revenue exam (audit) and appeal an unfair tax assessment on your behalf.
For more information, contact attorney Bethany Kroes at bckroes@mahanyertl.com or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in strict confidence.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and coming soon San Francisco, California. State and local tax services available in many jurisdictions.
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