Level 5 Financial Blog
Many people believe that the goal of tax planning is to arrange one’s financial affairs in order to minimize federal income taxes in that particular year. While such activities can be productive, they may create a case of “winning the battle, but losing the war.” Trying to minimize one’s lifetime tax bill is usually a better objective, even though it may raise income taxes in the short term. Consider the early years of retirement as an example.
Our federal income tax code is uniform for every state in the union, so one might conclude that the answer to this question would be “No”. However, the fact that property law is not uniform across the nation can actually create a circumstance where this can become a reality.
Conservative politicians often claim that migration patterns within the United States are influenced by the taxing policies of the various states. If this claim were true, people would be expected to be leaving higher tax states and they would be losing population. Conversely, lower tax states would be gaining population as the number of people moving in would exceed the number moving out. Is this true?
Federal income tax rates attract a great deal of attention. This is to be expected because our federal income taxes are the largest tax bill most of us will pay. However, state taxes are also significant and they come in multiple forms. How much will the average American pay in state levies? Which state extracts the most from its residents?
One of the tax increases proposed by the Biden Administration would restore corporate tax rates in the U.S. to 28%. This was the level they were at prior to the Tax Cut and Jobs Act of 2017, which lowered rates to their current 21%. Regardless of one’s beliefs on the merits of the spending proposals, it is clearly worthwhile to be aware of how our corporate rates stack up against the rest of the world. Our corporations must compete with others based outside the United States and many would argue that there should be a “level playing field”.