Financial issues

In addition to federal income taxes, there are a plethora of other taxes. Most states impose  their own income tax. This typically adds another tax rate of between 0% and 10%, depending on state and income. Worse, each state has its own idea not only of what its tax rate and tax brackets should be, but even how taxable income should be computed. Thus, you need to learn not only the federal tax code, but also your state’s tax code. For example, California has the highest marginal state income tax bracket that is not federal deductible: 9.3%. Montana has the highest marginal state income tax bracket that is tax deductible on your federal income tax: 11%. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming levy no state income tax, and New Hampshire and Tennessee tax only interest and dividend income.
Many counties pay for school education with property tax rates. In the richer counties of southwest Connecticut, the tax is about 1% of the value of the house, but it can reach about 4% in the poorer urban counties. In Maine (the second-highest property tax collector in the nation), residents pay 5.5% of their income in property tax. Many states also levy a sales tax. Tennessee and Louisiana have a sales tax of 8.35%; Alaska, Delaware, Montana, New Hampshire, and Oregon levy no sales tax. (A nice summary can be found at www.retirementliving.com/RLtaxes.html. It also includes a ranking of the tax burdens by state—Alaska [with 6% of total income], New Hampshire, Delaware, and Tennessee have the lowest; New York [with 12.9% of total income], Maine, Ohio, and Hawaii have the highest.)
If you have to file in multiple states or even in multiple countries—although there are rules that Complex Complexity. try to avoid double taxation—the details can be hair-raisingly complex. If you find yourself in such a situation, may the force be with you!
Finally, there are social security and medicare contributions. Although these are supposedly insurance premia, any money taken in today is immediately spent by the government on the elderly today. Thus, anyone young today is unlikely to receive much in return from the government in 20 to 30 years—when there will be fewer young people around to pay their retirement benefits. Thus, many financial economists consider social taxes to be as much a form of income tax as the statutory income tax.
This blog also ignores many other non-income taxes. For some taxes, such as the sales tax, it is not clear how to use expertise in finance to lower them. For other taxes, such as the estate tax, you need extremely specialized financial vehicles to avoid or reduce them.