State Tax Vs Sales Tax, Which Is Worse? (low income, mortgage)

[countrypooh4]

My family and i are looking to move to TN. We like the area and know that the state doesn't have a state tax. On the down side, we've heard that the sales taxes are very high there. We are looking at NC also but they do have a state tax and not sure what the sales tax is there. Any opinions on what's worse?

[bbkaren]

Well...how much is your state income tax (% of your income)?

Sales tax in TN is around 9 or 9.5% (depending on where).

Here in NJ our sales tax is 7% so from my calculations, if state income tax is 2.5% or more here in NJ, then I save money in TN.

And that is assuming that in TN, I spend EVERY dime I make on items taxed at 9.5%. Which is silly.

Keep in mind that:

1. Sales tax is only charged on taxable things you BUY...not every single dime you earn. You don't get charged sales tax on the money you use to pay for, for example, your mortgage. Income tax is charged on every dime you earn, including that mortgage money.

2. Sales tax in TN is graduated on larger items--as the amount increases, the tax decreases (i.e. maybe it's 9.5% only on the first $1,000, then it decreases in percentage.)

[JMT]

Originally Posted by bbkaren

Well...how much is your state income tax (% of your income)?

Sales tax in TN is around 9 or 9.5% (depending on where).

Here in NJ our sales tax is 7% so from my calculations, if state income tax is 2.5% or more here in NJ, then I save money in TN.

And that is assuming that in TN, I spend EVERY dime I make on items taxed at 9.5%. Which is silly.

Keep in mind that:

1. Sales tax is only charged on taxable things you BUY...not every single dime you earn. You don't get charged sales tax on the money you use to pay for, for example, your mortgage. Income tax is charged on every dime you earn, including that mortgage money.

2. Sales tax in TN is graduated on larger items--as the amount increases, the tax decreases (i.e. maybe it's 9.5% only on the first $1,000, then it decreases in percentage.)

In addition, the sales tax on groceries is 8%, not 9%.

I would MUCH rather have a sales tax than an income tax. With an income tax, there's absolutely NOTHING you can do to offset it. You can't give yourself a pay raise. Well, unless you're a politician. And with the graduated income tax, sometimes a pay raise actually bumps you into a higher tax bracket meaning your take-home is LESS than it was before the pay "raise."

But with a sales tax, you control how much taxes you pay. If you don't want to pay the sales tax on a $3 loaf of bread, then buy a $2.80 loaf of bread. If you can't afford the sales tax on a $15,000 car, then buy a $14,000 car. In other words, there's almost ALWAYS the option to buy something cheaper, whether it's food, clothes, electronics, or cars. But once they start taxing your income, you're stuck.

[bbkaren]

Yup, it gives you an incentive, actually, to do things the old fashioned way--

If you really want to save money, you could buy ingredients for the bread and pay tax on a purchase of 55 cents, and bake the bread yourself.

Or grow the produce yourself. Healthier and much much cheaper--and putting the effort into these things makes them taste better and the work builds character to boot!

[JMT]

Originally Posted by bbkaren

Yup, it gives you an incentive, actually, to do things the old fashioned way--

If you really want to save money, you could buy ingredients for the bread and pay tax on a purchase of 55 cents, and bake the bread yourself.

Or grow the produce yourself. Healthier and much much cheaper--and putting the effort into these things makes them taste better and the work builds character to boot!

Ain't it the truth!

Holy cow I'm imagining the aroma of freshly-baked bread. I'm off to visit my brother and his family in NC, and they do bake all their own bread (they even grind their own wheat). Nothing better than a thick slide of hot bread slathered in real butter...

[Sparkman]

One other thing, non-residents (tourists) help you pay your taxes. Since people are only there for a short period of time it is really not noticed too much by any individual, but the cumulative effect is that a substansial portion of Tn residents taxes are paid by others.

[TNkudzu]

TN Sales Tax is high but you have to look at the whole tax burden before you can make a judgment.

TN ranks number 48th or 8.5% on State Tax burden and 46th or 28.8% when you include the Federal Tax.

North Caroline ranks number 19th or 11% on State and 24th or 31.2% for all Taxes combined.

Here is a website for current Tax burdens.

The Tax Foundation - State and Local Tax Burdens Compared to Other U.S. States, 1970-2007

[piedmont]

In general, the greater your income, the less the impact of a sales tax (vs. an income tax).

Sales tax takes a much greater chunk of a low income family's budget than of a high income family's budget. Rich or poor, we all buy many basic items and hence pay sales tax on them.

[AlisonL]

The things we are sure of in life.....death and taxes.

[strumpeace]

Sales tax is a regressive tax that puts an unfair burden on the poor, imo.

And don't even get me started on how the poor--the people who buy lottery tickets at a very disproportionate rate--fund the educations of middle and upper class children in TN.