Don't understand Idaho's high taxes (Twin Falls: car registration, insurance, buy)

[Cnynrat]

Originally Posted by volosong

Social Security income is not taxed in Idaho. That will help me, but withdrawals from my 403(b) are going to sting.

I think the fact that social security benefits are not taxed has a lot to do with Kiplinger's rating for retirees.

Other than that isn't a particularly low tax state. Not among the worst, but not among the best either. It looks like the tax system is designed around the relatively lower average incomes prevalent in the state.

[AK76]

Originally Posted by gbioryl

After taking several vacations to the Spokane, Coeur d'Alene areas I am wanting to move my family to the Inland NW. Upon doing my research I discovered to my dismay just how terrible super conservative Idaho is on taxes when compared to Washington.

Idaho is the most conservative state in the union according to the last presidential election, even more so than Texas, Arizona, and Utah. Idaho is one of the most free states when it comes to leaving the citizen alone. Yet Idaho has one of the highest tax burdens of any state, let alone a conservative one.

Idaho charges a sales tax on groceries and charges the highest of its seven income tax brackets at 7.4% at only $10,5000. Really? Ten grand? McDonald's employees working 30 hours a week making minimum wage make ten grand a year in Idaho (I checked).

The income in this bracket is higher than the highest rates of liberal states Connecticut (6.7% $250,000), Maryland (5.75% $250,000), Massachusetts (52.0%), Delaware (6.6% $60,000), and Rhode Island (5.99% $135,000).

In fact Idaho ranks just barely behind Washington with regards to tax burden. Washington has no income tax, but high sales and property taxes (except groceries). This causes the two states, diametrically opposed politically, to lie almost dead even when it comes to tax burden. How is this possible.

I will still choose Idaho over Washington in a heartbeat since the overall tax burden is the same but Idaho is more free. But understand my confusion when I will have to pay basically the same tax rate as the liberal nut state 30 miles to the west.

So, what are you saying?

Paying zero income tax while paying some sales and property tax is a more beneficial scenario to me, versus paying income, sales and property tax. Sales and property tax can be mitigated to a degree by lifestyle and habits, as well as opportunity to shop across state lines where the adjacent state has zero, or less sales tax.

[lurtsman]

Originally Posted by AK76

So, what are you saying?

Paying zero income tax while paying some sales and property tax is a more beneficial scenario to me, versus paying income, sales and property tax. Sales and property tax can be mitigated to a degree by lifestyle and habits, as well as opportunity to shop across state lines where the adjacent state has zero, or less sales tax.

Mitigating sales tax through cheating the tax man by lying on your state tax forms about if you made purchases for consumption within your state that were not taxed.

This is why the border towns can be so common.

[ShadoAngel]

In fact Idaho ranks just barely behind Washington with regards to tax burden. Washington has no income tax, but high sales and property taxes (except groceries). This causes the two states, diametrically opposed politically, to lie almost dead even when it comes to tax burden. How is this possible.

You seem to be laboring under the delusion that politicians actually enact policies that are in line with their campaign speeches. Sorry about that.

Actually it's only recently that Idaho has 'caught up' to Washington. If you browse the historical data at TaxFoundation.org, you can see that for a long time Washington had a statistically significant lead on Idaho regarding tax burden. Both states these days have an average tax burden. Since 2006, Idaho has ranked 20-something. Hardly "one of the highest tax burdens of any state."

That said, it would be interesting to find out why Idaho's tax burden seems noticeably higher than their similarly conservative and mountainous neighbors in Wyoming and Montana. The agriculture in Southern Idaho might have something to do with it but I'm not knowledgeable enough say for sure. Banjomike probably knows...

[banjomike]

Originally Posted by ShadoAngel

You seem to be laboring under the delusion that politicians actually enact policies that are in line with their campaign speeches. Sorry about that.

Actually it's only recently that Idaho has 'caught up' to Washington. If you browse the historical data at TaxFoundation.org, you can see that for a long time Washington had a statistically significant lead on Idaho regarding tax burden. Both states these days have an average tax burden. Since 2006, Idaho has ranked 20-something. Hardly "one of the highest tax burdens of any state."

That said, it would be interesting to find out why Idaho's tax burden seems noticeably higher than their similarly conservative and mountainous neighbors in Wyoming and Montana. The agriculture in Southern Idaho might have something to do with it but I'm not knowledgeable enough say for sure. Banjomike probably knows...

Montana has no sales tax, so everything else- property taxes, licenses, etc. all are much higher. Idaho takes its revenue in many little bites; Montana gets its revenue in big bites once a year.

Wyoming has heavy depletion taxes on it's oil and gas production, which make up a major part of the state's revenue base. With a population of only 580,000, without the depletion taxes, the state would either be very poor or the taxes horrendous.

[f5fstop]

And license plate fees in WY are approx. 10 times that in ID. And for me, property values in the only three cities I liked, Cody, Jackson and Lander were way too high for my taste.

[pnwmdk]

Originally Posted by gbioryl

After taking several vacations to the Spokane, Coeur d'Alene areas I am wanting to move my family to the Inland NW. Upon doing my research I discovered to my dismay just how terrible super conservative Idaho is on taxes when compared to Washington.

Idaho is the most conservative state in the union according to the last presidential election, even more so than Texas, Arizona, and Utah. Idaho is one of the most free states when it comes to leaving the citizen alone. Yet Idaho has one of the highest tax burdens of any state, let alone a conservative one.

What makes you think Washington has low taxes? It does not. In fact, Washington's sales tax can be as high as 9.6% on sales, and then it has a gross receipts tax of up to 1.8 percent - for a sizable business, that could be 20 to 50% of your profit margin. That's a tax you pay even if you lose money - and the highest rate of tax is on ... Services.

Then Washington has a USE tax, a personal property tax, and a real estate tax. And there's more, as well.

[aiden_is]

One thing to consider is that many of us make substantially more than the state average, but live in average sized homes well below our means. High income taxes mixed with low property taxes encourage out-of-state land ownership by non-residents, because they can retain much more of their income from outside the state, and still enjoy the benefits of the low property taxes.

It's a model that encourages low income and stymies small business by penalizing profits and gains. It also is more volatile because it ties the state's budget to the income production of its residents, who may or may not be hit hard by economic factors. In a budget shortfall, the government is more likely to reach even more into people's pockets to save itself. Property values, on the other hand, tend to be much more stable from year to year, barring the 2007 real estate bubble. It's a stable tax base that can be more effectively budgeted and managed, because property isn't lost like income - it is exchanged between individuals.

And by design, income taxes are much more intrusive into ones privacy than property taxes.

However, this is the model that Idaho uses. Trying to change to a completely different revenue system is exceedingly difficult, and most residents would revolt against any sort of change to their perceived monthly expenses.

[f5fstop]

By living in my house and having it as my full time residency, I get a 50% reduction in property taxes. Whereas, if I lived in WY (example), owned property in ID and rented it, my property taxes would be double what I pay now. So, is it worthwhile?

I agree, income taxes are more intrusive, while sales tax hurts the low income group to an extent. At my stage in life I prefer income tax to sales or property taxes. It saves me money. My desire is to no longer pay income taxes to the Feds or any state. Probably not feasible, but I'll settle for close to zero.

[banjomike]

Originally Posted by f5fstop

By living in my house and having it as my full time residency, I get a 50% reduction in property taxes. Whereas, if I lived in WY (example), owned property in ID and rented it, my property taxes would be double what I pay now. So, is it worthwhile?

I agree, income taxes are more intrusive, while sales tax hurts the low income group to an extent. At my stage in life I prefer income tax to sales or property taxes. It saves me money. My desire is to no longer pay income taxes to the Feds or any state. Probably not feasible, but I'll settle for close to zero.

Whether it's worth it or not all depends. Lots of folks in California who owned homes they bought for $50,000 and sold for $250,000 downsized into apartments and used the money to buy rentals here. In Idaho Falls, rental apartments were always scarcer than homes until the mid-90s, when a lot of Cali money was poured into new apartments.

Obviously, the it must have been profitable to invest the money here; I don't know anything about the profit margins, but there sure were a lot of investors. Some moved here as well.

I'm like you, f5.
I would rather pay income tax and find ways to minimize it than getting gnawed on by all the sales and property taxes.

For me, knowing one big tax hit is coming is a much better incentive to save than the hidden taxes are. I would rather stash my future tax money in an account and take the interest myself than have the interest go in some other pocket.

While the interest rates are pretty lousy now, I found that just letting my interest lie in the account is building a cushion if I ever have a big jump in income tax. Back when they were higher, the interest was a little ace in the hole for whatever. I seldom touch a savings account for any money except for the purpose of the account.