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What You Need to Evaluate Before You Move to a Zero Federal Income Tax State
Are you aware of the seven states in America where people pay zero federal income tax? When you hear this, you may even consider moving to one of these states. Maybe you are already thinking about all the things you can do with the money you keep when you don’t get any income tax deductions. However, before you rush to make any decision to move or not to it is wise you consider all facts. The idea is to see if it is a smart decision for you now to move to these states where you don’t pay any federal income taxes. Continue reading to see key things to evaluate to make an informed decision.
The zero federal income states offer a pro-growth environment as they attract many young people. Most likely, by the time you graduate, you will have to accumulate massive student loans. You may be in a difficult financial position despite having secured employment when most of your money goes towards student debts and the federal income taxes. Hence, you should explore ways you can avoid paying the federal income tax legally. Hence, you may have money that you can use to pay the student debts fast when you don’t have tax deductions. Moving to another state is also simple when you are a young person searching for his or her first job, unlike a person with roots in another state.
You should be prepared to face other taxes when you move to a state with no federal income tax. Not paying the income tax can be a great motivation to relocate. The challenge, however, is that the government needs to generate revenue by collecting taxes. Therefore, although no money is directly deducted from your paycheck as tax, you will pay more taxes for buying basic goods. The taxes may be informed of property taxes and sales taxes. Therefore, when you move to these no income tax states, you should expect your expenditure on basic stuff to go up.
You should also know that income tax is progressive while sales tax is regressive. Your income level determines the total amount of money that is deducted as tax. Hence, people with a high income pay more than the ones with a low wage. The challenge with sales taxes is that you pay an equal amount in taxes irrespective of your income. Thus, even if you are poor, you pay equal taxes when you purchase a product as a rich person does.
Therefore, it is wise you examine the above things before relocating to a no federal income tax state.