Florida does not have a state income tax. A CPA friend of mine in Tampa reminded me of that the other night on the phone. While he was rubbing that income-saving fact in a bit, chiding me in a way … he knows the real truth. When it’s all said and done, states and local governments grab your hide in the end — it’s all just carved in different ways. As CPAs, you certainly know all about this crazy state-by-state scenario.
But what about the classic question, “Is it better to live in a state with no income tax?” The main argument that the “no income tax” folks profess is that states with no income tax become better-positioned for growth. Create more jobs, keep workers in your state, and on and on.
“It’s a way to disguise taxes to people,” states Curtis Skinner, a labor economist at Columbia University. The issue is highly controversial, with as many different opinions as there are fish in the sea. Well, maybe that’s overstating it.
So, we all know how those sans-income-tax states produce revenue. To get the full picture, just listen to Bob Dylan sing the line, “You don’t need a weatherman to know which way the wind blows,” while opening a cold Coca-Cola. The almighty excise tax! Boosting excise taxes, a.k.a., “sin taxes,” are big-time viable revenue streams for state budgets. States have introduced new taxes on sugar-sweetened beverages, hiked up cigarette taxes, pumped up gasoline taxes, and more, but have largely avoided significant tax increases on alcoholic beverages.
According to Beer Institute in Washington, D.C., taxes are the single most expensive ingredient in beer, costing more than the labor and raw materials combined.
The below map (right-click on it to open a larger view) shows the state beer excise tax rate in all fifty states and the District of Columbia. Rates vary widely by state: as low as $0.02 per gallon in Wyoming and as high as $1.29 per gallon in Tennessee.
Maryland and District of Columbia are both in the top ten highest rates.
Wisconsin, Missouri, and Colorado are among the lowest state tax rates. Correct me if I’m wrong, but I’m pretty sure there’s a massively large brewing company housed in each of those states.
Now, how about that client of yours who says, “I think I want to move to Florida — there’s no state income tax!” …..
“The avoidance of taxes is the only intellectual pursuit that carries any reward.”— John Maynard Keynes