5 most tax-friendly states to live in

Kelly Phillips Erb, Walletpop.com

During tax season, it seems as if everyone thinks the grass is greener one (or in some instances, two) states over. Wonder whether your own envy is justified? Luckily, the Tax Foundation, a nonpartisan tax research group based in Washington, D.C., crunched some numbers to determine which states are the most generous with residents.

Unlike other “best of” surveys, the Tax Foundation takes a number of criteria into consideration, including state and local income taxes, property taxes and local sales taxes. Other overviews, such as those based on the Census, may rely solely on state income tax revenue (hence the minor difference in ranking).

Below are the five most tax-friendly states, according to the Tax Foundation’s results. Worth noting is that the results were calculated based on information made available from the Tax Foundation for 2008, the last tax year for which state income tax data is completely available. Any recent changes, where significant, have been noted.

1. Alaska. Alaska doesn’t have a state income tax, state sales tax or a state inheritance tax. As tax burdens go, it’s the best state to live in.

It hasn’t always been that way. In 1978, Alaska was ranked 49th, making it one of the most tax-heavy states in the country. Residents can thank federal funds and big oil for the dramatic reversal.Three years ago, federal funding accounted for almost one-fifth of Alaska’s revenue. Per capita, Alaska receives more federal funding than any other state in the country, an honor held since 1999. That means much of Alaska’s infrastructure is paid for by federal funds, not state funds. If you don’t have much in the way of expenses, you don’t need much in the way of additional revenue. As a result, the tax burden stays pretty low.

But wait! The Last Frontier’s tax perks get even better: The completion of the federally-funded Trans-Alaska pipeline and the establishment of Alaska as an energy center for gas and oil has proven to be a boon for residents. After the pipeline was completed, the state created a program called the Alaska Permanent Fund, that invests and distributes royalties from oil companies doing business in Alaska to residents. In 2008, the check was a record $3,269 per eligible resident. Eligible residents are those (including children) who have lived in Alaska for a full calendar year.

To read more, visit: http://www.walletpop.com/blog/2010/04/13/5-most-tax-friendly-states-to-live-in/

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