We are still talking about -- or, as a 12-year-old niece would say, still talking about -- sales tax and its impact on estate planning. We admit that 12-year-olds may not be the only ones that were hoping for more drama here -- trust us, if we could think of a way to incorporate a superhero, we would do it.
The point of a good estate plan, though, is to avoid -- or avoid, for the 12-year-olds -- drama. And, as we said in our last post, a good estate plan takes retirement expenses into account. And, sales taxes, it turns out, can factor into some important retirement decisions.
When we left off, we had reviewed state sales taxes and noted that Alaska and New Hampshire have no state sales tax. Delaware, Montana, and Oregon have neither a state nor any local sales taxes.
Even if Alaska has no state sales tax, it does have the highest maximum local tax reported at 7.5 percent. The state's average local tax, however, is just 1.76 percent. The full list can be found here. For the record, California's average local sales tax is 0.95 percent, and the maximum local rate is just 2.5 percent.
This is all useful information for seniors trying to decide where to live and to shop. The researchers pointed out that sales taxes could send retirees to the suburbs or across the border to shop -- Oregon is awfully convenient for Northern California residents. Sales tax can take a huge bite out of a budget, and it's hard to absorb that on a fixed income.
The Tax Foundation offered an important caveat about the data, though. The calculations in the report do not take into account which items in your shopping cart are taxed. For example, California taxes clothing, but New York does not. California, like most states, does not tax groceries, but Oklahoma, Utah and a handful of other states do.
The foundation also suggested that income taxes with their varying rates, deductions and credits are more difficult to understand than sales taxes. Maybe that's true, but this is plenty complicated. What it tells us, though, is that we may want to work with a tax-savvy estate planning professional, especially as we get closer to retirement.