Where you live, it turns out, has a lot to do with how much you pay in taxes. States are increasing taxes on high-earners ($250,000 and up) in an effort to boost their own budgets, which means anyone in an upper-income bracket might want to mull over a move to a cheaper state. My story today delves into the ins and outs of various state tax hikes, and how to avoid them, if you’re so inclined.
[In Pictures: The Worst States for Millionaires.]
Meanwhile, MoneyRates.com is out with a list of the “best and worst states to make a living.” The website included average wages, unemployment rate, and cost of living in the calculation. The best states? Illinois, Washington, Texas, and Virginia. The worst include Hawaii, Maine, Montana, and California.
The most interesting finding to come out of these two reports is the overlap between “worst states to earn a living” and the highest tax states. As I point out in my article, the highest tax states include California, Hawaii, and Oregon, all three of which also top MoneyRates.com’ “worst” list.
While this correlation doesn’t necessary mean that the states are the worst places to earn a living primarily because of their high tax rates, it does suggest that the two factors are related, which makes sense, since take-home pay is lower where taxes are higher.
This discovery also got me wondering about how state culture affects our spending habits. On Experian’s NationalScoreIndex.com, which displays average credit scores by state, the southern states (Mississippi, Alabama, Georgia) tend to have lower credit scores compared to states in New England. Experian reports that the New England average is an impressive 712 while the south central average is in the less-than-stellar 670s. What could explain these regional differences? Are New Englanders just better at paying their bills?
What do you think? Do you think your state affects your own money habits?