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QUESTION:  The Two City Comparison table's effective income tax rates appear to have a reversed relationship.  I know that my New York-Manhattan Base City should display a higher total effective income tax rate and yet, the Geographic Assessor reports that the Boca Raton, Florida Destination City has a higher tax cost.  Florida doesn't even have a state income tax.  What is going on?

 

If you are comparing two cities based on a home rental situation, you will definitely expect to see lower tax rates in states with no state income tax, such as Florida, Texas and Washington.  If you are comparing two cities based upon a home ownership situation, however, please do not forget the mortgage interest tax deduction, which is factored into the total effective combined income taxes category.  Often a very expensive home will offset an area's higher local taxes by means of the federal mortgage interest deduction.  To view the unadjusted income taxes, simply toggle between "rent" and "own."  See US Mortgage Interest Deduction - Two Kinds of Debt for additional information.

 

Please note: ERI estimates are not intended as substitution for legal counsel.  All tax planning should be assisted by the expertise of an international tax consultant.

 

See Two City Comparison - Background for more information.