Top 10 Tax-Friendly Towns

Every so often US News & World Reports goes through its database and comes up with another “Top 10″ List. This time their efforts have produced one dear to all tax-fearing hearts, the 10 most tax-friendly towns in America. After all, you can’t do anything about federal taxes, but you can vote with your feet and move to a low tax town or city.

The US News list is an interesting one, will almost all of the towns in the west. Most made the list because there is no state income tax or some other tax absence.

* Billings Montana
* Cheyenne, WY
* Doral, FL
* Henderson, NV
* Juneau, AK
* Manchester, NH
* Nashville, TN
* Sioux Falls, SD
* Spokane, WA
* Stafford, Texas

Tennessee and New Hampshire only tax dividends on interest and dividend incomes, which is partially why Nashville and Manchester made the list. Stafford, Texas has the unusual distinction of having abolished its property tax, in addition to not having an income tax. Nashville is an example of a city with a good property tax relief program for seniors (it freezes them at a base level), along with the entire state of Florida.

Any town in a state that doesn’t have an income tax or a sales tax is going to be tax-friendly. There are 7 states that don’t charge an income tax, and 5 with no sales tax. Only 1 state has neither tax, and that one is Alaska (a state that actually pays residents to live there, thanks to its enormous natural resources). Cities sometimes impose one of these taxes even if the state does not have it. Property tax is the other tax that really whacks retirees, since this one is not related to income in any direct way. Some states offer significant freeze programs and other types of tax relief for seniors - they can be extremely valuable.

Of course being tax-friendly is not the entire picture. If you have to move far away from friends and family just to save some money, it might not be worth it. For many folks, watching their grandchildren grow up is worth the extra expense. For another, other expenses can more than make up for taxes. Juneau Alaska is very expensive (as is everyplace in Alaska), although the cost of living comes out to about average when you factor in paying no taxes and actually getting a tax payment.