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I mean I know the common answer is going to be “because that’s the way it’s always been” but I never understood why it made sense that you should owe less to the federal govt. in taxes because you chose to live in a state that had high income and/or property taxes. Property taxes go to support local things like fire, police, school districts, etc. things that you as a San Fran resident directly benefit from and someone as a resident of Florida gets no benefit from. So why should you get to deduct that from what you owe to support federal infrastructure? It’d be like deducting your cost of private HS tuition or a private security detail.
Because usually these high tax states (blue) get a lot less money back (doner state) from the federal government than what they pay in. Guess who the reciepiants are, red states!
I mean I know the common answer is going to be “because that’s the way it’s always been” but I never understood why it made sense that you should owe less to the federal govt. in taxes because you chose to live in a state that had high income and/or property taxes. Property taxes go to support local things like fire, police, school districts, etc. things that you as a San Fran resident directly benefit from and someone as a resident of Florida gets no benefit from. So why should you get to deduct that from what you owe to support federal infrastructure? It’d be like deducting your cost of private HS tuition or a private security detail.
Property taxes are also based on valuations, and there's not much politicians can do about that. I'm sure if they could they would legislate it so that everyone could afford a house.
I've lived in a number of different states, and in my experience, the tax burden did not affect my life one way or another. I've lived in MA, SC, AZ, OR, and TX. All of them have pretty different tax profiles. It's interesting to the extent that I didn't notice huge differences other than lifestyle and weather. The main difference I could notice was that Massachusetts had better public transportation, by which I mean it actually had public transportation at all. Public trans might as well not exist in those other states, although I did take the bus now and then to work in San Antonio, if I was up 2 hours earlier than usual and felt like getting some reading in.
If anything, what I noticed is that suburban America is more or less the same everywhere, it's surprising how much that is so.
Probably the main reason I didn't notice the tax issue is that I've never made enough money to notice the hit of income tax, nor been able to buy a house nice enough to notice property tax (I am just starting to notice a property tax bite now in OR, but it's due to my valuation, not the rate).
Generally speaking, the tax profile I've liked the best is moderate income rate, low property rate, low sales rate. The states with low income tax nickel and dime you through various fees and sales taxes. It gets annoying, especially Texas's damn car inspections and the like, trying to pretend that making me buy a sticker every year and making a mechanic go through some theater in the process of buying it, is not a tax. Stupid. Just tax me the $60 a year and save me the time.
Last edited by redguard57; 01-31-2020 at 06:19 PM..
Does the purchase of a home guarantee that costs of living (taxes, insurance, etc.) won't go up? Of course not. If you maxed out your home buying dollars to that extent, the fault is your own if you can no longer afford it.
I lived in NNJ- Bergen County, one of the expensive areas. When I bought my house after my divorce, of COURSE I looked at the monthly cost net of tax impacts when I decided how much I could afford to borrow. Perfectly rational, especially in a HCOL area. I was still borrowing $100K less than the silly bank was willing to lend me so I wasn't exactly maxed out (and didn't want to be). Having this change apply to residences people already owned was cruel. The change in alimony (no longer a deduction for the person who pays it) was at least applicable to agreements on or after a future date.
My brother, who just retired, is moving from Charlotte to FL. Guess why. It's not the weather. He figures he'll save $2K/month so he can afford the nice home they just bought. (Yeah, he did well at his job.)
I lived in NNJ- Bergen County, one of the expensive areas. When I bought my house after my divorce, of COURSE I looked at the monthly cost net of tax impacts when I decided how much I could afford to borrow. Perfectly rational, especially in a HCOL area. I was still borrowing $100K less than the silly bank was willing to lend me so I wasn't exactly maxed out (and didn't want to be). Having this change apply to residences people already owned was cruel. The change in alimony (no longer a deduction for the person who pays it) was at least applicable to agreements on or after a future date.
My brother, who just retired, is moving from Charlotte to FL. Guess why. It's not the weather. He figures he'll save $2K/month so he can afford the nice home they just bought. (Yeah, he did well at his job.)
Did you have to sell your home because the change in the tax law made it no longer affordable for you?
Because usually these high tax states (blue) get a lot less money back (doner state) from the federal government than what they pay in. Guess who the reciepiants are, red states!
Yeah, well, our federal income tax system was never intended to work on a "you give us tax dollars and we will give them back to you in proportion to what you gave us" system. That's just not the way it works. The way it works is that people pay federal income taxes according to how much they make regardless where they live.
It's irrelevant that you and your neighbors pay more federal income taxes than people in lower income states. You pay more federal income taxes because you make more money. It's that simple. People who earn less money pay less in taxes and tend to get a higher percentage of their taxes back in the form of government benefits because they EARN LESS, not because of where they live or how they vote.
If one studies the entire cost structure with living in many places...it's really not that different.
Yes, if you compared living in NYC or Boston...sure.
But I live in a low-cost (middle class old burb) of Sarasota Florida.
A 250K house pays about 3300 a year taxes. An older house like this cost $2400 a year for bad insurance.
That's $5700 per year.
In MA. a 500K house (which is double the size of the FL house) pays about 8K in taxes and $1400 in Insurance - actually LESS than in FL if I had a house of the same value. Auto insurance is much cheaper in MA.
I'm not claiming FL isn't cheaper - in MA. we get universal health care and lots of other benefits. But what I am saying is that when I work out all the details.....building materials deteriorate here and houses need LOTS of continuous work, etc. etc - that it doesn't come up to some amazingly large figure that would "Make me Move".
If I save 2K per year or even 5 or 6K per year and the inferior Medical care (rated vastly lower) ends up killing or hurting me then I haven't really saved money.
I suppose if I was broke I'd think of that 2 or 5K differently. But it's hard to imagine a family moving to another state for that kind of savings. One could downsize or change their lifestyle, etc.
And, again, this is reliant on people not having friends, family and connections anywhere. Are so many people really rootless that they just can shop around for what the best deal is?
I'm very spoiled and if I had to sit in traffic in one place....but I saved a few grand a year...it wouldn't be worthwhile to me. Same with other things like noise, pollution, culture, shopping and such. I don't want to get in the car to go everywhere so having everything within a few miles is important to me...more important than a fee K per year.
The biggest savings we have is not having kids living with us any more and therefore having a smaller (vacay) house....which then uses vastly less in utilities, etc....and we clean it ourselves, etc. etc. - so it's more the downsizing that is the savings.
Property taxes are also based on valuations, and there's not much politicians can do about that. I'm sure if they could they would legislate it so that everyone could afford a house.
Don't forget the special assessments that can add thousands to a property tax bill... it costs about 50% more to live in the city limits of Oakland CA than to live 10 minutes away in say Castro Valley...
Also... some cities like Oakland have a new tax called a vacant parcel tax which is an additional 6k on that vacant lot you have been trying to build on for years but can't find your way to clear design review...
Personally, many people with money have left... at work... just about every retirement is out of State now...
Nevada and AZ are tops for retirees where I work...
Humans are economic animals...
I have also seen some of the brightest younger grads make their way out of State... Austin seems to be very popular although my sample group is very small it is surprising the number of Santa Clara and Stanford grads choosing this path and with their parents blessing...
Realtors have always used the write off of property taxes when selling Bay Area Real Estate... which no longer applies.
If one studies the entire cost structure with living in many places...it's really not that different.
Yes, if you compared living in NYC or Boston...sure.
But I live in a low-cost (middle class old burb) of Sarasota Florida.
A 250K house pays about 3300 a year taxes. An older house like this cost $2400 a year for bad insurance.
That's $5700 per year.
In MA. a 500K house (which is double the size of the FL house) pays about 8K in taxes and $1400 in Insurance - actually LESS than in FL if I had a house of the same value. Auto insurance is much cheaper in MA.
I'm not claiming FL isn't cheaper - in MA. we get universal health care and lots of other benefits. But what I am saying is that when I work out all the details.....building materials deteriorate here and houses need LOTS of continuous work, etc. etc - that it doesn't come up to some amazingly large figure that would "Make me Move".
If I save 2K per year or even 5 or 6K per year and the inferior Medical care (rated vastly lower) ends up killing or hurting me then I haven't really saved money.
I suppose if I was broke I'd think of that 2 or 5K differently. But it's hard to imagine a family moving to another state for that kind of savings. One could downsize or change their lifestyle, etc.
And, again, this is reliant on people not having friends, family and connections anywhere. Are so many people really rootless that they just can shop around for what the best deal is?
I'm very spoiled and if I had to sit in traffic in one place....but I saved a few grand a year...it wouldn't be worthwhile to me. Same with other things like noise, pollution, culture, shopping and such. I don't want to get in the car to go everywhere so having everything within a few miles is important to me...more important than a fee K per year.
The biggest savings we have is not having kids living with us any more and therefore having a smaller (vacay) house....which then uses vastly less in utilities, etc....and we clean it ourselves, etc. etc. - so it's more the downsizing that is the savings.
Or figure a 950 square foot 2 bedroom 1 bath bungalow in East Oakland circa 1922 might come with 10k property tax bill... sobering when you run the numbers...
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