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Old 11-17-2011, 08:00 AM
 
3,493 posts, read 4,712,387 times
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Thinking about where my parents will retire, and learning about our future tax burdens, I have started the process of comparing tax rates. Colorado comes up as about 5th for lowest taxation. (Alaska is first for anyone wondering) Is it true that there is no inheritance tax? Does that apply to taking in the inheritance or to paying it out? IE. If our grandparents die in a state that has a tax, and we live in a state that does not, which states policies are followed?

Second. I also read that food and prescription drugs are exempt from sales tax. In Iowa it is claimed that food is exempted, but really it is only very specific forms of food. For instance, all restaurants are taxed. Pre-packaged food is taxed. Anything labeled as junk food is taxed. You essentially must buy raw ingredients to qualify it as food. Now I don't eat much junk food, and I certainly don't go out to eat when I'm saving for a down payment, but given our schedules we will often include something that has most of the work done. (IE Stouffers) Put some fruit or veggies with it for a side dish and you're set. Are pre-packaged foods taxed?

Thanks. 8.5 months or less to go!
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Old 11-17-2011, 01:31 PM
 
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I always caution taking "tax burden" rankings with a HUGE grain of salt, unless you know EXACTLY how the calculations are made. The one tax in Colorado that is low is residential property taxes--Colorado has one of the lowest effective tax rates on residential property in the US. Most other taxes are middling at best. Colorado has a low (2.9%) STATE sales tax rate, but counties and municipalities can levy their own sales taxes. The composite state and local sales tax rate can be anywhere from 5%-8% or more, depending on location. The sales tax is Colorado's most overused tax. Here is what food is exempt: http://www.colorado.gov/cs/Satellite...&ssbinary=true . Unlike other states, state and local sales tax rates can apply to motor vehicle purchases, too. Buy a $40K pickup in Colorado and, depending on where you live, you may owe over $3,000 in sales tax--payable before the vehicle can be licensed. Colorado motor vehicle license fees are fairly high, too--typically several hundred dollars per year for a new or near-new vehicle. The fee is based on the age, weight, and market value of the vehicle. Colorado income tax rates are fairly reasonable.

Finally, both the state of Colorado and many of its county and local governments are in serious financial distress. Since the Colorado Constitution severely limits the ability of government to raise taxes, there are severe cuts coming in Colorado public services, including many that most people would consider essential--things like law enforcement, fire protection, and public health. Also, thanks to the revenue limitation Amendment in the Constitution--which limits tax increases but does not limit fees--many agencies are adopting fee-based structures for services.

Estate tax information here: http://www.colorado.gov/cs/Satellite...&ssbinary=true

In short, Colorado taxes are generally not exorbitant, but the level of public services is not very high in many cases, either. Many places do have higher tax burdens than Colorado, but Colorado is not a "tax haven" by any means. About the only states that are "tax friendly" to individual residents these days are ones that have substantial sources of revenue that are not citizen-based. Wyoming is the best example of that--a state with huge tax revenues from the minerals industry and only a bit over 500,000 residents to use public services. Want a tax haven? Go there.
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Old 11-17-2011, 02:14 PM
 
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We love the tax laws in wyoming, but to find gainful employment Colorado Springs seems a much better bet. As you said, there are 500k people in Wyoming. That's essentially one city in the entire state. No matter how low the taxes are, it won't make up for not being able to find a legitimate white collar job.
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