Big government means big taxes and big taxes mean less money for those that actually produce things that pay the taxes. Some believe that making more money is worth having higher taxes, but the cumulative effect is that everything must cost more to pay the extra taxes. Chances are, that if you live in a high tax, "high income," state, you're living on less land, and paying a lot more for a smaller abode, with higher electric and gas bills.
There's a correlation between cost of living and taxes. The cost of living (COL) in Massachusetts is 138% of the cost in Tennessee. Tax burdens are 212% higher there. COL is 156% of TN in New York. The tax burden is 220%. COL is 152% of TN in California. The tax burden on workers is 200%.
I looked at 4 States: California, Massachusetts, Tennessee, & New York. The median income is $55.4, $62.6k, $41.7, and $57.3k a year respectively. They collect $3,157, $1,784.46, $3,350 & $3,477 in taxes per resident respectively. Unlike the other 3, the primary source of taxes in Tennesse is sales tax. There is no income tax. That means if you need to lower your tax bill in TN, all you have to do is spend less money. And with $14.1 Billion in tourism dollars spent in Tennessee annually, that lowers the taxes per resident down to $1577/resident.
Now, not every resident earns or spends income, so the actual cost to workers is different. The Bureau of Labor Statistics tells us that only 58.3% of the population is employed, as of August 2012. That brings the tax burden to $5,415, $5,746/worker in Massachusetts, $2,705/worker in Tennessee, & $5,964 in New York at the state level, in addition to property taxes, which is primarily a municipality/county tax. The average property tax is $1,369 in California, $5,207 in New York, $915 in Tennessee, and $2,613 in Massachusetts. This varies greatly in California, with many areas paying $6k/year in property taxes for 1500 square feet homes on postage stamps and others living in the desert. And yes, renters pay property taxes too. The landlord passes it on to you in the form of rent, because to do otherwise would mean he was losing money.
And then there's the mortgage/rental costs itself. Because everyone pays more taxes in three of those states, everything costs more, including real estate. The average home size varies in the 4 states, but 2500 square feet is not far off the average. In Tennessee the average 2500 square foot house costs $188.7k, where as in New York it costs $305.8k, in California $322.3k, and in Massachusetts $314.8k. On a 4% APR 30 year mortgage, that's $7,356 more per year in mortgage payments between a $315k home versus a $188.7k home, of the same size.
It's not just more expensive to buy a house in the high tax states, you also get less land. There's one person per 4 acres in Tennessee, one per 3 acres in California, where vast areas are uninhabitable, one per .65 in New York, and 1.3 per acre in Massachusetts.
And then there is the electricity to power your home. This too is more expensive in high tax states. The average house uses about 950 kilowatt hours/month. In Tennessee, that is $1022, in Massachusetts, $1743, in New York, $2124, and in California $1744 per year.
These aren't the only things that are more expensive because of the higher taxes, but these are some of the big items. The Cost of Living compared to the National Average is 88.9% in Tennessee, versus 135.1% in California, 125.2% in New York, and 123.3% in Massachusetts. That means it costs 138.7% more to live in Massachusetts, 140.8% more in New York, and 152% more in California, than it costs to live in Tennessee.
And just with the tax burdens and those few major expenses, homes and electricity, the take home income is less when the remainder is divided by the Cost of Living. If you have 2 dependents, your median income Federal tax is $8,537 in Massachusetts, $3,786 in Tennessee, $6,964 in New York, and $6489 in California. The remaining income is equivalent to $36,821 in Massachusetts, $41,676 in Tennessee, $29,263 in New York, and $29,240 in California.
But, how far does that money go? Sometimes, making less, with less government, means you have more to spend.
American States spend $592.3 Billion (State level only) on education alone, and yet our education ranks lower than many Nations in the world. More money doesn't mean a better education. Tennessee spends 29.75% of its budget on Education, or $1,457/resident, while California spends only 26.76%, but $2,029/resident on Education, but California has the worst ranked schools in the Nation. The tick on the back of Education spending is the Federal Department of Education, which has ZERO students, and yet sucks up $77.4 Billion in "Education" tax dollars.
Sources: Bureau of Labor Statistics, US Census Bureau, Property taxes.us, Electric Choice.com
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