Taxes affect home-buying decision

State Senator L. Scott Frantz (R-36) warned at a recent forum in Stamford that wealthy residents will leave Connecticut to go to states that tax less. The panel in attendance included Benjamin Barnes, budget chief heading the Connecticut Office of Policy Management and state Senator Bob Duff (D-Norwalk). The Connecticut General Assembly is considering a commitment of approximately $100 billion to improve the state’s infrastructure (i.e. highways and train systems). The proposed improvements would likely increase taxes to cover upfront expenses which would eventually be repaid with revenue resulting from this investment.

While an increase in taxes may provide motivation for people to move to other states (i.e. Florida) the last two harsh winters is another motivation to move to a warmer climate. A survey done last December by the Connecticut Department of Revenue Services determined that approximately 350 of the wealthiest taxpayers pay over five percent of Connecticut’s total tax bill or almost $950 million.

Connecticut does not allow tax deductions which can lower collected taxes. Another issue of contention is estate tax. While real estate taxes are relatively lower in Greenwich, these other taxes are of concern. As many of us who grew up in Connecticut remember, there wasn’t an income tax which attracted many people to the suburbs from New York City.

It is somewhat complicated to compare income taxes of states. Many states use a graduated system (i.e. Hawaii has 12 rates for different income brackets). Some states impose a same flat percentage of incomes no matter the amount of a person’s pay and they include Colorado (4.63%), Indiana (3.75%) and Illinois (3.3%). There are seven states that don’t have income taxes today (Alaska, Florida, Nevada, South Dakota, Texas and Wyoming). New Hampshire and Tennessee impose income taxes solely on dividends and interest.

Seniors seeking to move to a state with more favorable taxes should not just consider those which do not levy income taxes. Those states raise revenue in other ways including sales taxes, excise taxes, license taxes, intangibles taxes, property taxes, estate taxes and inheritance taxes. Seniors should consider state taxes on retirement benefits, state income tax rates, state and local sales tax, state and local property taxes and state estate taxes.

Some states exclude pension income entirely for those that are qualified (Illinois, Mississippi and Pennsylvania). States that exclude from taxes a portion of pension income include: Arkansas, Colorado, Delaware, Georgia, Hawaii, Iowa, Kentucky, Louisiana, Maine, Maryland, Michigan, Missouri, Montana, New Jersey, New Mexico, New York, Oklahoma, South Carolina, Virginia and Wisconsin. States that tax pension income are: Alabama, Arizona, California, Connecticut, District of Columbia, Idaho, Indiana, Kansas, Massachusetts, Minnesota, Nebraska, North Carolina, North Dakota, Rhode Island, Vermont and West Virginia.

Since some retirees will be subject to higher federal income taxes, they should look more closely at sates with lower or no income tax to defray from their overall tax obligation.

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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