If you are lucky enough to contemplate retirement in these tough economic times, keep in mind how much of your hard-earned money you will have to fork over to the government. With a nod to Kiplinger’s “Money Power,” which compiled the rankings, here are the Top 10 Tax-Unfriendly States for Retirees, which are ones, for the most part, predominated by liberalism.
1. Vermont: The state that elected an avowed socialist to the U.S. Senate deserves the No. 1 ranking on this list. Retirement income is not exempt at all from the state income tax, and out-of-state pensions are fully taxed. Plus, sky-high property taxes make it hard to buy a home, and the high restaurant tax makes dining out more expensive.
2. Minnesota: Maybe this is why Tim Pawlenty didn’t catch on as a Republican presidential candidate—the state he presided over is a tax magnet. Social Security income gets taxed at the same rate as it is taxed by the federal government. In some cities, the sales tax hits 9.53%, and Minnesota has a high state-income tax.
3. Nebraska: How did the Cornhusker state make this list anyway? Could it be the unicameral legislature? Nebraska fully taxes all pensions, including from the military, and real estate taxes are high. The state inheritance tax hits annuities and property.
4. Oregon: The state, which has voted for the Democratic presidential candidate in the last six elections, has the steepest tax rates for high-income earners, so stay away if you are successful. Oregon also has an inheritance tax that is levied on assets no matter where they are located.
5. California: No surprise here. The land of Hollywood, Nancy Pelosi and broken government, tax-and-spend California has some of the highest state-income tax rates in the nation, topping off at 9.55%. Add a 9.25% sales tax in some cities to high real-estate costs, and good luck stretching your dollars in the Golden State.
6. Maine: Just as they send liberal Republicans to Washington (see Senators Olympia Snowe and Sue Collins), so does the state of Maine attack taxes from a RINO point of view. All income over $20,150 is taxed at a rate of 8.5%, and there is a 5% state sales tax. And there is a personal property tax. Tea Party, anyone?
7. Iowa: Maybe the Hawkeye State residents should pay more attention to their own state’s politics and less to their quadrennial time-in-the-presidential-spotlight with their fun and games at the Ames Straw Poll. In Iowa, retirement-plan distributions are taxed at rates as high as 8.98%, and property is subject to taxation by multiple levels of local government.
8. Wisconsin: No wonder the state of Wisconsin offered such good retirement benefits to its public employees—it soaks its residents with taxes. Wisconsin taxes pensions and annuities, and has state income tax rates as high as 7.75% and a 5.5% state sales tax.
9. New Jersey: Despite conservative firebrand Gov. Chris Christie’s success in curtailing the power of the mighty teachers’ unions, New Jersey is still a mess. The state’s combined state and local rates of taxation are the highest in the nation. Don’t even think about buying a house: The property tax rates are off the charts.
10. Connecticut: Connecticut has a 7% luxury tax, a 6.7% state sales tax and a state income tax of up to 6.7%. High-income earners pay a state levy on their Social Security benefits, out-of-state pensions are fully taxed, and property taxes are high. Because the Nutmeg State went 61% for Obama in 2008, presumably they don’t mind having their wealth spread around.