5 States Where Taxes Are Going Up in 2017

Tax

Here is a nice article provided by Sandra Block of Kiplinger:

 

By Sandra Block, Senior Associate Editor | January 2017

 

Although President-elect Donald Trump has pledged to cut federal taxes, state taxes are rising across the U.S. as financially strapped states search for funds to repair deteriorating infrastructure and close widening budget shortfalls. In their search for revenue, states have targeted everything from e-cigarettes to lottery winnings.

 

Even Alaska, long a low-tax haven and one of our 10 most tax-friendly states, is feeling the heat. Alaska currently has no income or state sales tax. But to offset a sharp decline in oil revenues, Gov. Bill Walker has proposed a 3% statewide sales tax, which he says is needed to close the state’s $3.2 billion budget deficit.

 

Raising existing state taxes or imposing new ones could backfire if they lead to fewer taxpayers. Technology has made it easier for individuals and businesses to move to states—or countries—with lower tax rates, says Joe Henchman, vice president of legal and state projects for the Tax Foundation, a policy research organization based in Washington, D.C. “Everybody is under the gun to be more competitive, whether it’s government or the private sector,” he says.

 

Here are five states—including three already on our list of the 10 Least Tax-Friendly States in the U.S.—where residents will pay higher taxes in 2017. Take a look.

 

1. Maine

Kiplinger’s tax rating: One of the 10 least tax-friendly states in the U.S.

Income tax: 5.8% (on taxable income of less than $21,050 for single filers; less than $42,100 for joint filers) - 10.15% (on taxable income of $37,500 or more for single filers; $75,000 or more for joint filers)

State sales tax: 5.5%

What’s changing in 2017: Higher income taxes on top earners

In November, Maine residents narrowly approved a 3% income tax surcharge on residents with income of more than $200,000. The tax hike, which will be used to fund public education, raises Maine’s top tax rate in 2017 to 10.15%, the second-highest in the U.S. (California’s top tax rate of 13.3% is the highest.) The surcharge will raise an estimated $142 million in the first year, according to the state’s Office of Fiscal and Program Review.

 

2. California

Kiplinger’s tax rating: One of the 10 least tax-friendly states in the U.S.

Income tax: 1% (on taxable income of less than $7,850 for single filers; less than $15,700 for joint filers) - 13.3% (on taxable income of $1 million or more for single filers; $1,052,886 or more for joint filers)

State sales tax: 7.25% (as of Jan. 1, 2017)

What’s changing in 2017: Higher taxes for smokers

Californians voted in November to increase the state tax on cigarettes from 87 cents to $2.87 a pack, effective April 1, 2017. The tax will also apply to e-cigarettes. The first year, the tax will raise an estimated $1.4 billion, which is expected to be used for health care and smoking-cessation programs.

Californians also approved a measure to extend higher income tax rates for the state’s top earners through 2030. The three highest tax rates, which start at 10.3% and top out at 13.3%, were originally scheduled to expire in 2018.

 

3. New Jersey

Kiplinger’s tax rating: One of the 10 least tax-friendly states in the U.S.

Income tax: 1.4% (on taxable income of less than $20,000) - 8.97% (on taxable income of $500,000 or more)

State sales tax: 7%

What’s changing in 2017: Higher gas taxes

In October, Gov. Chris Christie signed legislation that raised New Jersey’s gas tax from 14.5 cents to 37.5 cents a gallon. Overnight, the state’s gas tax jumped from the second-lowest in the country to the seventh-highest. Funds from the tax hike will be used to shore up the state’s deteriorating roads and bridges.

Although the state’s budget deal will increase the cost of gassing up in the Garden State, it also includes some generous tax reductions. The state will gradually increase the amount of retirement income that’s sheltered from tax through 2020, when a married couple will be able to exclude as much as $100,000. In addition, the amount of assets excluded from the state’s estate tax will rise from $675,000 to $2 million on January 1, and the tax will disappear in 2018.

 

4. Pennsylvania

Kiplinger’s tax rating: Mixed tax picture

Income tax: 3.07%

State sales tax: 6%

What’s changing in 2017: New taxes on digital content, higher taxes on smokers

The 2016-17 budget bill approved by Pennsylvania lawmakers in August extended the state’s 6% sales tax to digital streaming services and downloads. The tax package also hiked taxes on cigarettes by $1, for a total tax of $2.60 per pack, and extended the tax to e-cigarettes and smokeless tobacco.

The budget package also took a bite out of residents’ lottery winnings. Previously, Pennsylvania was one of only two states (California was the other one) that exempted lottery winnings from state taxes. The budget package scrapped that exemption, retroactive to Jan. 1, 2016.

 

5. Louisiana

Kiplinger’s tax rating: One of the 10 most tax-friendly states in the U.S.

Income tax: 2% (on taxable income of less than $12,500 for single filers; less than $25,000 for joint filers) - 6% (on taxable income of $50,000 or more for single filers; $100,000 or more for joint filers)

State sales tax: 5%

What’s changing in 2017: Higher sales taxes

In April, Louisiana increased its state sales tax by one percentage point, to 5% from 4%. The change boosted the average state and local sales tax rate to 9.99%, the highest in the U.S. The increase is scheduled to expire on June 30, 2018. Lawmakers also voted to extend the sales tax to a number of items that had been exempt, including Mardi Gras beads.

Smokers in the Big Easy will pay more, too. The April tax package hiked the tax on a pack of cigarettes to $1.08 from 86 cents.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail  info@diversifiedassetmanagement.com.

 

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