The prevailing economic climate has forced many low tax states to also reduce their income and investment taxes to ensure that they stay attractive investment destinations. The latest to join this group is Tennessee.
Trying to Compete
While Tennessee already did not have a wage income tax, it does levy a tax on dividends and other income. The state’s lawmakers are now planning to phase out the investment income tax as well making it truly a state with no income tax.
Many other states such as North Carolina have already cut personal income tax rates and this is why their economy is doing well compared to bankrupt states such as California and Illinois. Texas is the leader in this regard with low taxes and large cities that are still growing. Florida is doing well as well.
More Power to the People
The new income tax rates will affect the lives of both investors and individuals. With businesses moving to states with lower or nil investment income tax, many potential employees will also have to move. Another group of individuals that is affected by the changes in the investment income tax laws are retirees who depend on investment income.
Whether you run a business or have plenty of investment income, you should consult with a tax lawyer before you decide on the location for your next investment or retirement home. Just moving to a low tax state can increase the amount of money you will have available.
On the Right Track
When you are looking for a tax lawyer to advice you on your options, ensure that you retain one that is familiar with the income tax and investment tax rates of the various states apart from being knowledgeable about federal tax rates. This will help you avoid paying high taxes without breaking any laws.
Just as multinationals use the different tax rates in various countries to increase their profits legally, you too can use a tax attorney to ensure that your investments are structured to lower the effective tax rate on your total income.