Introduction
Deciding on the residential State is one of the most complex choices that a person has to make. Notably, each of the 50 states has a distinct tax system separate from the federal one. There are different types of state taxes, including income, sales, property, excise, and user fees, among others. There is also some variance in the source and expenditure of the collected revenue. The tax burden can be determined by assessing the percentage of the total income of the adult occupants that is channeled to the taxes. According to Fishman (2021), Illinois ranks position 9 with 10%, Louisiana is at 29 in the list with a burden of 8.3%, while Washington is number 33 at 8.2%. The objective of this paper is to analyze which state between Illinois, Louisiana, and Washington provides supports financial security the most.
Financial Considerations
One of the most crucial factors that influence residency and investment is those that have a direct impact on earnings and expenditure. As stated by Johnson (2021), federal income taxes remain constant regardless of the State that which a person chooses to live. However, other taxes differ vastly depending on the location that an individual chooses to reside in. For instance, there are States which primarily rely on Sales and Property Tax or their revenues, while others include income tax (Johnson, 2021). Still, some states levy high duties on the people with high socioeconomic status as compensation for the poor (Creedy, 2017). The total tax burden to a person may also be different depending on the guiding laws and policies.
State Income Tax
Illinois has a flat rate of 4.95% for individual income, which can be increased or declined to affect the income (Spreen, 2018). In 2019, H.B. 5864 was enacted to create a number of new enterprise income tax credits, which started in 2021 (Loughead, 2021). The primary target for this development is the construction industry. Conversely, Louisiana has an income tax that is divided depending on the amount of money that a person gets. Specifically, it has three tax brackets in which people with upper income are taxed at a higher percentage. Specifically, people who earn $0-$12,500 pay 2%, those whose salary is $12,500-$50,00 are taxed 4% while those with an income of $50,000 and above pay 6% (SmartAsset, 2021). According to Davis & Buffie (2017), the states such as Washington, which do not have any income tax on individuals or corporations, have an overall more burden on the citizens. When considering a resident knowing the information about how the income is taxed helps with planning.
Sales Tax
Sales tax is mostly applicable to the entrepreneurs and may either be in the form of seller use or receipt, or occupation. A tax rate of 6.25% is applied in Illinois for merchandise and 1% for qualifying medical appliances, food, and drugs (“Sales & Use Taxes”, 2021). In Illinois, Senate Bill 119 demands that remote sellers collect the local sales tax, which is known as the “Retailers Occupation Tax” (Loughead, 2021, p.5). In addition, this State also has the capital stock tax or franchise where others are exempted.
Louisiana’s sales tax is an average of 4.45%, although the local municipality may influence the rate to an even higher level (Afonso, 2017). Worthy of note, Louisiana provides income tax credits that offset those of properties. Thus, Louisiana has a high tax on sales which, when combined with that of the national government, is 9.52% (Cammenga, 2021). Washington is among the top five states with the highest sales tax rates when combined with the federal obligation and currently stands at 9.23% (Cammenga, 2021). In Washington, a sales tax of 6.5% is imposed on traders regardless of the local government (“Taxes in Washington”, 2021).
Property Taxes for a Median-Priced Home per Year
Owning a home is one of the dreams that all people have, yet, if the property tax is high, then it is bound to have negative implications for the residents. According to Bhattacharya (2020), Illinois has the second-highest rate of property tax in the nation. The medium real estate is rated at 2.3%, which enabled the State to collect $205,000 as compared to the county’s Midian value of $4,705 (Bhattacharya, 2020). Louisiana is one of the States which impose taxes on personal property (TPP), which is gauged to be economically harmful as determined by Article 467 of the Louisiana Civil Code. The personal property tax of Washington state is high but varies depending on the assets owned and must be filed by the end of April.
State Portion of Gasoline Tax
In recent years, there has been increased emphasis on environmental conservation. Many states have imposed taxes on non-renewable fuel with an intention of conserving energy and protecting the ecosystem (Giménez-Nadal & Molina, 2019). Illinois has the third-highest gasoline tax rate which stands at 52.01 CPG and Washington is in the fourth place at 49.4 CPG (Cammenga, 2021). Louisiana has a medium gasoline tax, which is often channeled into different revenue tools, including maintenance and repair of public roads.
Utility, Entertainment, and Amusement Taxes
The Utility User Tax (UUT) is almost the same across all the states and includes a levy on electricity, gas, and communication. The rate in Illinois is 5%, in Louisiana, it is 2%, while in Washington, it is about 6%. There are also different forms of amusement and entertainment tax, including television shows, videos, and movies, among others which may be taxed as sales. In Washington, enterprise owners are obligated to pay the business and occupation (B&O) or public utility tax (Loughead, 2021). Revenues are also collected in physical entertainment places such as for tourism.
Non-Financial Considerations
Public Transport and Proximity to Recreational Centres
Non-financial considerations are also vital when making a decision on the State that a person wishes to settle. To start with, having a reliable public transport system that can allow for movement from one locality to the next is vital. In these regards, some of the considerations to make include commute time, and road and bridge quality. For people that are yet to buy a car, and have to navigate different jobs without wasting much time the public transport remains an important consideration. In addition, it is easier to access recreational places such as parks and wildlife areas. Washington is also a great place for entertainment when compared to the other states (LĂłpez-Ortega et al., 2020). Therefore, Washington states have many parks and indoor sites for leisure which make it more favorable than the other states.
Security and Safety
The other important consideration is the safety of the State to live and owning property. Louisiana is among the top ten most dangerous states in the United States, with a murder rate of 11.4, 2 traffic deaths. eight workplace injuries per day (Postman, 2020). The results of Illinois are relatively better given that the recorded homicide rate is 6 while that of Washington is even more attractive at 3 (Postman, 2020). Living in Washington, thus, offers the most security compared to the remaining states.
Weather and Climate
The climatic condition of a place has significant implications on the quality of life and progress that a person makes. For instance, working in adverse weather conditions can be difficult for most people hence, the need for a better conditions. Moreover, some extreme weather patterns can even result in diseases such as skin cancer. Washington has a relatively good climate with a warm season lasting between May to September, where the average temperature during the day is around 400 degrees Celsius (“Average weather”, 2020). Better still, even during the summer and the winter, the weather is never too extreme as it varies from 18°F to 85°F (“Average weather”, 2020). The area is also cloudy, which implies that it is humid and prevents direct sunshine to the skin.
Cost of Living
The different States demand that Individuals have some amount of money that can afford them a decent standard of living. The average amount of money needed will always vary from one state to the next. The average cost of living in Illinois is $58,070, in Louisiana is $46,460, while in Washington state it is $66,870 (Gray, 2019). The implication is that when living in Washington, a person is likely to have more expenses. The salary that a person earns may determine the kind of life that they live. For instance, a lower income will still afford an individual residing in Louisiana a better life standard when compared to Washington.
Verdict on the Choice of State
My first choice for residence is Washington because it does not have income tax which is favorable to me as I start earning. The property tax is also interesting when compared with that of Illinois, which is among the highest in the nation. As a young person, investment in decent housing is important, but consideration should be given to various taxes that influence elasticity and demand (Anderson & Shimul,2018). It is also admirable that Washington has a low crime rate, a good transport network, access to recreational centers, and a conducive weather pattern. The primary limitation is that the cost of living is relatively high, which may make saving difficult.
However, with the right determination, there is a wide selection of jobs that a person can take and increase the average income earned by individuals. The second choice is Illinois because it is a safe place, well connected, and average cost of living. However, the property tax is high, and the flat rate of income tax may result in people of average and low earnings having a higher tax burden. The third place is Louisiana, which has tax incentives for people who earn a minimum wage to help in creating jobs (Thom, 2019). However, in as much as it offers a lower cost of living, the crime rate is exceedingly high, which implies that the place is not safe for investing.
Conclusion
The decision on the place of residence is complex given the multiplicity of financial and other factors involved. Evidently, the taxation system of Illinois, Washington, and Louisiana differ considerably, thus affecting business, the standard of living, and ownership of property. In addition, factors such as climatic conditions, crime rate, public transport, and amenities also influence the quality of life in any given location. Upon considering all the factors, Washington remains one of the best states to live in. Although it is expensive, it offers the potential for career growth, investment, and higher status in life.
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