HOW TO DECK THE AX COLLECTOR FEDERAL STATE LOCAL
(MONEY Magazine) – From sea to shining sea and from poll to irate poll, Americans are confronting that old tormentor, high taxes. What fans them to a white-hot fury this year is the growing recognition that their tax load has metastasized into three wealth-threatening forms -- federal, state and local. Once upon a time, how much you sent to the IRS defined your tax situation. Today, your 1040 is only the beginning. This truth confirms two undeniable facts of life in the 1990s: Taxes at all levels have embarked on a protracted trip north. And you'll be along for the chilling ride unless you learn to recognize the true total costs of your federal, state and local property taxes and marshal appropriate defenses. First of all, you'll need to get a grip on just how the federal tax hikes that are part of last October's deficit-reduction law will affect you. In 1991 and beyond, the devil will be in the details of deduction tightening, which is now Congress' preferred method of raising extra revenues even as it avoids the politically riskier approach of hiking official tax rates. We distill the new wisdom of dealing with the feds into 11 tax-cutting strategies that you can act on now (see page 66). Next, you'll have to concentrate more intently than ever on cutting your state taxes, which is where some of the biggest increases will be coming in the future. You automatically take the initial step by lowering your federal tax. Most states link their tax bite to your federal return, nibbling from your income a percentage of what you pay to the feds, or requiring you to use your federal return to compute your state tax. But you need to go further than that. If a new tax wave is swelling in your state, you must at least find out enough about its proportions to include it in your budgeting. The master table on pages 90-91 will help. It ranks the 50 states and the District of Columbia according to how heavily they tax a typical MONEY subscriber family with annual income of $72,406. The table identifies the current tax hells (among them Hawaii, New York and Wisconsin) and havens (like Texas, Nevada and Washington). Finally, just as federal deficit-trimming is squeezing the states -- since 1980, for instance, federal mandates have contributed to a tripling of state Medicaid costs -- the states are squeezing the localities. This fiscal Darwinism is the single greatest reason why local property taxes have been the fastest growing of all major taxes in recent years. To beat that bite, we offer four simple steps to challenging a property assessment and winning a reduction in your local real estate tax bill (see page 102). If the level of Americans' anger over taxes is any augury, taxpayers will be fighting back with far more than sharp planning between now and the 1992 < presidential election. (For a profile of one tax activist, turn to page 94.) Election Day 1990, when six governors went down in defeat at least partly over tax issues, was most likely just the opening round. Consider our latest Americans and Their Money poll of 300 subscribers, conducted by the Gallup Organization the weekend after the election. One in four respondents who voted said they cast ballots mainly as tax protests. An equal proportion of subscribers told Gallup's questioners that they have considered voting with their feet -- by moving to escape high taxes. Nearly one in 10 has actually moved to another city for just that reason. The trend is likely to accelerate. As the story on page 86 spells out, more and more states will be forced to enact steep tax hikes in the next year or two -- at a time when Congress is poaching on traditional state revenue sources such as gasoline, cigarette and liquor taxes. On one matter at least, MONEY subscribers are unequivocally clear-eyed. A landslide 83% say they expect fresh federal tax hikes in the next two years. And 72% figure that the new deficit-reduction law will barely nick the $220 billion federal deficit. Most tax experts agree. David A. Berenson, national director of tax policy at the accounting firm of Ernst & Young in Washington, D.C., advises that Americans count only on ''permanent uncertainty'' from the tax makers. That is all the more reason for you, the taxpayer, to defend yourself as best you can.
CHART: NOT AVAILABLE CREDIT: Charts by Serban Epure CAPTION: WHERE TAX INCREASES HURT THE MOST Which of your taxes is rising fast est? How do you think the money is being spent? And would you move to escape taxes? To find out, MONEY commissioned the Gallup Orga nization to conduct an Americans and Their Money poll of 300 ran domly selected subscribers, re peating many questions we posed last year as well. You'll find the an swers on this page. Most striking of all: while nearly one in four sub scribers has considered moving to another state to escape taxes, nearly one in 10 has actually moved to another city for that reason. (The poll's margin of error is plus or mi nus six percentage points.)
HOW THE BURDENS COMPARE Real estate is getting worse the fastest.
CHART: NOT AVAILABLE CREDIT: Charts by Serban Epure CAPTION: VOTING WITH YOUR FEET It's no longer unthinkable to flee.
CHART: NOT AVAILABLE CREDIT: Charts by Serban Epure CAPTION: HOW WISELY TAXES ARE SPENT People are losing faith in all government.
CHART: NOT AVAILABLE CREDIT: Charts by Serban Epure CAPTION: WHAT'S UP THE MOST Only 17% reported that none of their taxes rose in a year.