When you receive your paycheck, do you
ever look at the state income tax withholding and think
about relocating? I think all of us, unless we're lucky
enough to live in a state with no income tax (AK, FL,
NV, NH, SD, TN, TX, WA, WY) do that at one time or another.
But where do we go?
We decided to do a quick state income tax comparison by calculating annual withholding
amounts for two "typical" employees. We realize that by comparing withholding
amounts, rather than actual, calculated income tax liabilities, we are only estimating
ranking among states but thought the resulting approximation would provide us
some food for thought in our relocation consideration.
We first defined our "typical" employees:
(1) Ms. Red is single, has no dependents,
claims 1 exemption, does not itemize deductions, and makes
$24,000 per year.
(2) Mr. Green is married (and his wife has
no income), has two kids, claims 4 exemptions and makes $60,000
per year.
We do not account for any local taxes such as those required
in Pennsylvania and Ohio. No disability withholding is taken into consideration either. Examples
of this are California, New York and Hawaii.
For the example, we visited Paycheck
City and set up our two employees in the "Paycheck Calculator".
Finally, we ran a payroll for each employee for each state and tabulated
the results (shown below).
Again, because our comparison is based upon withholdings (which
may or may not take into account excess itemized deduction amounts)
and not actual liabilities, take the results with a grain of
salt. But the next time you think of relocating, you might have
some idea where to start!
Click here for
a printable version (requires Acrobat Reader).
