Saturday, May 16, 2009

Torn: Texas Tax Dilemma

Texas happens to be one of 7 states in the U.S. that imposes absolutely no state tax on personal income. (The other states are Alaska, Florida, Nevada, South Dakota, Washington, Wyoming.) I wasn't aware of this fact before, but now that I have been enlightened, it makes perfect sense.


From a financial perspective, freedom from state taxes is awesome, even though I don't expect to be working in the near term. Compared with California's 9.3% state income tax for my (soon-to-be former) personal income bracket, that's a significant boost to disposable income once I do start working again (adjusting for lower income & lower cost of living in TX vs CA). If I find myself cash-strapped sooner than later and end up doing some consulting / writing / minimum-wage jobs during my "year off", I would embrace with widespread arms those extra few hundred bps on my paycheck.

From a social liberal perspective, my feelings are mixed. Initially, my gut reaction was guilt. As a progressive-minded individual who benefited greatly from Minnesota's stellar social/education benefits while growing up (let's set aside the collapsed bridge incident for now), it feels just plain wrong to keep all that extra cash for myself. But then I started thinking more about how disillusioned I've become regarding government's ability to write and execute meaningful policy. Plus, Texas gets more than enough income from all those big oil corporations.

Therefore, my conclusion so far is - (if I were to move to TX) Thank you Texas, I will gladly take that extra dough that would have gone towards paying state income tax. Then, I'll make the final determination regarding which causes most deserve my social dollars - and it's unlikely that all of these causes will be Texas-based. For a gal who has long prided herself on "voting with her feet," it does feel liberating to have discretion over where my tax dollars go. Well, state taxes anyway. Federal taxes are a whole other (depressing) story.

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