Q&A of the Day – How Florida’s Total Tax Burden Compares
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Today’s Entry: Brian- Is this true?
Bottom Line: Today’s note was sent with a story entitled: Moving to Florida might not be the tax play it’s cracked up to be – unless you’re loaded. The story is the latest in what has been a regular trend I’ve noticed over the past year. Creative efforts by national financial news outlets trying to throw shade on Florida. There’s a clear effort by some to send the message that Florida isn’t really as great as our record migration rates in recent years would suggest that it is. This is commonly done by analyzing data and presenting in a way that fits a narrative – a la the story referenced in today’s note. In fact, within the story itself this is essentially revealed. Quoting the story: States including Florida, Texas and Tennessee don't deliver quite the tax savings that their low-tax images might suggest, especially for lower-income households, according to a new analysis measuring effective state- and local-tax rates paid by various income groups from the Institute on Taxation and Economic Policy, a left-leaning tax think tank. So, in this instance, you have MarketWatch leaning on what they admit is a leftist partisan think tank’s dissemination of information to fashion the narrative that’s presented in the headline to their story. Let’s dive in and separate the facts from the fiction in addressing today’s question.
The crux of the argument that is made, in what is effectively a financial news hit piece, is done on the basis of Florida lacking a state income tax. Because Floridians account for state and local taxes in other ways, like paying sales and property taxes, (which is also true for states which also impose income taxes btw), the data that’s presented in the story in question is effectively manipulated. At the crux of the report what’s being measured and compared is the percentage of one’s income that’s spent paying for state and local taxes. To do this the report highlights the extremes. Citing the report:
- While the lowest-income Florida households are spending 13.2% of their income on state and local taxes, the richest 1% in Florida spend 2.7% of their income on state and local taxes.
This spread is what is being called a “tax inequality index”. And what is the prescribed solution? Instituting a progressive income tax system at the state level and redistributing the income of higher earners to those at the lower end. You know, effectively turning Florida into New York or California, the very states people have fled to Florida from in record numbers because of this type of social engineering at the state and local levels. But in reality, comparative tax burdens aren’t measured by the amount of money one specifically spends on taxes. Tax burdens are measured by the amount of money one’s able to retain net of taxes being imposed. Whereas Florida ranked last in the ITEP’s invented “tax inequality index”, the truth as reflected by the total tax burden the average Floridan pays is entirely different.
Here’s where Florida currently ranks in each tax category:
- Income tax burden: Tied for 1st
- Sales tax burden: 33rd
- Property tax burden: 26th
- Total tax burden: 5th
Not only is Florida’s total tax burden for the average Floridian fifth best. There’s only one state, Alaska, with an appreciable difference in total tax burden. Only 0.2% separates Florida, with a total state tax burden of 6.3%, from Delaware which is second at 6.1%. What’s more is that Tennessee, which was also called out in the report, has the 4th lowest total tax burden for the average resident of that state. The bottom line as it applies to measuring the tax friendliness of Florida in comparison to other states. The only state that you could live in and experience a noticeably lower total tax burden would be Alaska. And even then, the difference is only 1.2%.
Today’s question was whether the story entitled Moving to Florida might not be the tax play it’s cracked up to be – unless you’re loaded was true. The answer is that no, the narrative advanced by that headline is demonstrably false. As always there are two sides to stories and one side to facts. Florida’s total tax burden, whether you’re rich, poor or just the average Floridian is one of the five lowest in the country. In fact, Florida’s total tax burden is 23% lower than that of the average state and 50% lower than the highest tax state (which is New York). And as for the failed methodology of the leftist think tank...
While Florida’s tax burden is among the lowest nationally there is a political theme to total state tax burdens as well. The total tax burden of blue states averages being 5% higher than those of red states. How that could be good for anyone, especially those on the lowest end of the socioeconomic scale, is beyond me or economic reality. I suspect what’s behind the growing number of stories attempting to show Florida, and other low tax destinations like Tennessee in a negative light, is migration desperation. High tax and spend states like New York and California are seeing record budget shortfalls as record numbers of residents continue to flee those once great states. The liberal utopia valued by many in the national news media is being threatened. These narratives appear to be their efforts to fight back. Trying to tell fleeing New Yorkers that somehow or another Florida’s tax burden is worse, is laughable even without the data illustrating the point.