Some cities, like Cheyenne, Wyo., try to slash their budgets rather than increase taxes. In October, Cheyenne Mayor Jack Spiker announced a hiring freeze on nonessential personnel, a reduction of out-of-town travel, and a review of equipment expenditures. "Just like taxpayers, the city needs to tighten its financial belt during these times of economic uncertainty," he says. By leaving vacant positions open until the end of the year, the city estimates it will save $3,160 a month per entry-level employee and $5,050 monthly for each vacant mid-level position.
Perhaps the most tax-friendly state for retirees is Alaska. The geographically largest state in the union is the only one without any kind of income or sales tax. The city of Juneau levies a 5 percent sales tax, but seniors ages 65 and older who have lived in the city for at least 30 days and plan to remain indefinitely in the state can get a Senior Sales Tax Exemption Card for a $20 application fee. Those over age 65 may also be eligible for a senior-citizen property tax exemption on the first $150,000 of assessed value. All Alaska residents with at least one year in the state also receive annual Alaska Permanent Fund dividends. The payout was an unusually high $3,269 in 2008, but even more typical dividends have been nothing to scoff at, ranging from $827 to $1,964 over the past two decades. This dividend may be taxed as income on federal tax returns.
Here are 10 great tax havens for retirees: