Saturday, October 17, 2009

NYC: highest tax burden in US?

Being a resident of a NYC borough, I pay not only state tax which is relatively high in NY, but I have the privilege of paying a city tax as well. I estimate city tax alone will be about $5,000 off my base salary this year alone. That's great, right?! Okay, there are some benefits of living in what has to be the most heavily taxed area of the country. Namely, the public transportation. I don't have to own a car, pay car insurance or pay for gas because we actually have public transport, unlike other places in America. However, last weekend I started thinking for the first time about how simply moving across the river to NJ would save me $5,000 instantaneously. Not to mention moving to CT where there's no city tax and the state income tax is in the 5%s instead of the 6%s like NJ and NY.

In reality, I wouldn't get $5,000 for moving, because that money right now is deducted from my federal taxes, lowering my overall taxable income. Also, $5,000 pre-tax is a lot less post-tax (I'm in the 28% tax bracket). Plus, I'd have to pay a smidge more to take the bus or the PATH train in addition to the subway.

In the end, I'm guessing I'd only end up saving $3,300 or so. Not that that's anything to sneeze at, but in the end I don't know if its worth the quality of life sacrifice. However, if I could find a nice apartment at $1500 a month I'd save $1,800 annually so with the tax reduction I could save close to $5,000. An extra $416 a month is nothing to sneeze at.

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