Q&A – Florida’s Tax Independence Day Compared to Other States

Q&A – Florida’s Tax Independence Day Compared to Other States 

Each day I feature a listener question sent by one of these methods.       

Email: brianmudd@iheartmedia.com      

Social: @brianmuddradio     

iHeartRadio: Use the Talkback feature – the microphone button on our station’s page in the iHeart app.        

Today’s Entry: Brian- RE State taxes. The new report highlighted Florida’s “tax independence” coming earlier than other states. Please break this down. I have had debates with a friend who tries to argue that state taxes mostly balance out between red and blue states. The argument is that Florida’s lack of a state income tax is made up for in other ways. Thank you. 

Bottom Line: It’s a common refrain from those who run high tax states. It’s also, in the case of Florida’s taxes, almost entirely untrue. I’ll clarify. It’s not untrue that Florida derives revenue from other types of taxes as a means of funding the state in the absence of a state income tax. It’s that higher tax states do that too (in addition to imposing state income taxes). Today’s note came on the back of the annual reporting from Florida TaxWatch that Florida’s Taxpayer Independence Day, as they call it, was April 18th this year. For the first 107 days of this year the average Floridian worked effectively for the sole purpose of paying their tax bills at the federal, state and local levels. Most of the tax burden Floridians have worked three and a half months to account for is at the federal level. That’s static between the states. What is far from static is what’s paid at the state and local level.  

A commonly misunderstood or misconstrued concept is that Florida’s lack of an income tax is something of a siren’s call. For example, a 2021 story by Bankrate.com entitled: Is a state with no income tax better or worse for your finances? concluded that: “The benefits of living in a state with no income tax comes down to your personal finances”. In the summary it’s stated: Whether you should move to a state with no income tax depends on your personal financial situation and your individual priorities. Families with college-aged students might not want to move to a state with no income tax if it means paying more tuition. Meanwhile, if the bulk of your household budget goes toward groceries and clothing — items that are sales taxable — you might not save much money in the long run. That is true of some of the no-income tax states, but even the summary example provided to support that conclusion is false. That’s due to Florida’s ranking #1 for its higher education system nationally including having the most affordable in-state college tuition in the country - a distinction we’ve held for several years. The point is that Florida doesn’t fit any of the generalizations or narratives that go along with them. We’re a success story that’s unique.  

Florida’s a state that has had the top economy in the country, the top ranked/most affordable education system in the country and in the words of Florida TaxWatch: 

  • Florida’s state government tax burden is one of the lowest in the nation, while the local government burden is much closer to the national average. 

That’s the key. There are no “gotcha’s” to make up for it. To put this in perspective, the Tax Foundation keeps an annual tab on the total state tax burden paid per capita annually. Where does Florida rank? #49 (meaning we have the second lowest total tax burden). And Florida only missed out on the top spot by a total of $144 per person during the year to New Hampshire, another state which doesn’t tax personal income, which ranks with the lowest total state tax burden per person. No offense intended to New Hampshire which is a beautiful state, but how many people, given the choice, would rather live in New Hampshire to save $144 per year in taxes? But the story is even more impressive compared to the average state and especially the most expensive states.  

  • Compared to the average state, the average Floridian’s state tax burden is 40% lower 
  • Compared to the highest tax state – which is California – the average Floridian only pays 37% of the total tax burden 

Here’s another way of looking at this. Think of what the “average” state is to you. Would you rather pay 40% more in state and local taxes to live there? Fun fact btw, the state closest to being average by way of total tax burden is Rhode Island. And yes, another way of looking at just how high California’s taxes really are...the average resident of California pays 273% higher taxes to live there than the average Floridian does to live here. There are a lot of statistics that exist when comparing taxes between states. There are lots of ways to be able to paint pictures. I’m not sure any could be more profound than that one.  

As always there are two sides to stories and one side to facts. The fact of the matter is that while there are other states without income taxes that do compensate in other ways – Florida's not one of them. We’re unique in many ways and our state serves as a narrative buster in many ways.  

Sponsored Content

Sponsored Content