Individuals and businesses anywhere in the country can run into problems with taxes. From employee withholding taxes to local property taxes, bills come, and there are situations that cause payments to fall behind. Understanding changing tax law is the first step in staying compliant with payments and avoiding tax litigation. Researching the taxes applicable to an area is another way to ensure you and your business are compliant as you make a decision about locating home or office.
A recent study from the Tax Foundation ranked states according to state and local tax burdens. The report, called the Annual State-Local Tax Burdens report, indicates that the national state-local tax payment is around 9.6 percent of incomes on average. The highest rate is around 11.9 percent.
Texas ranked fourth on the report, with an average state-local rate of 7.5 percent. Three states had a lower ranking, with the lowest coming in with a rate of 6.9 percent of incomes on average. Tax rates for each state were close, with states ranking in the middle of the report separated by fractions of a percentage.
The report also showed that taxes individuals and businesses paid to their respective states decreased from 2010 to 2011. At the same time, taxes paid to entities outside of home states increased, bringing up an important consideration for Texas businesses and individuals. When doing business outside of the state or working for companies in other locations, taxes become more complex.
It’s important to understand how income linked to multiple locations can change tax burdens. Educating yourself about tax laws in any location relevant to yourself or your business is essential to avoiding future litigation or issues.
Source: Cleveland Advocate, “REPORT: Texas has fourth lowest state-local tax burden in the U.S.” No author given, Apr. 03, 2014