For example, some states don’t dif- ferentiate between ordinary income and capital gains (the latter typi- cally is taxed at a lower federal rate), while others might tax sales of mu- tual funds but not individual stocks. Seniors often receive favorable

treatment regarding their state tax bills. Retirement income — military or otherwise — may be fully or partially exempt; even your capital gains may be tax-free. Local homestead exemp- tions may give the elderly a break on their property taxes, which is often the largest tax bill for retirees who no longer generate income from a job.

All politics is local Just as at the national level, a state government’s agenda and its priorities can aff ect your tax bill dramatically. States might turn to tax increases to balance their budget, a legal require- ment in all states except Vermont. For example, states with unfunded pension plans might be forced to raise taxes to cover this expense. If politi- cians on the campaign trail promised to reduce personal income tax rates, they might fi ll in the gaps by deny- ing more specifi c tax breaks, perhaps those that benefi t you. City and county governments, un- able to tax income, typically fi nance their operations through property and sales taxes, but these taxing powers often are limited by the state. Jurisdictions known for good schools and beautiful parks are great places to raise your family, but you typically pay for these benefi ts through higher local taxes. Decisions on the state level also can put municipalities on the defensive. For example, North Carolina recently disallowed the col- lection of local business privilege li- cense fees, causing cities to scramble to fi ll the resulting budget hole. A few states are rich in revenue-

producing resources, allowing the government to reduce taxes collected from citizens. Wyoming, for example,

has oil and mineral rights, while Flor- ida lets tourists help pay their bills, resulting in no state income tax.

But it’s not a tax, right? It’s hard to win over a constituency with more taxes, so local govern- ments increasingly are using fees such as tolls, parking meters, and venue admission prices to supple- ment tax proceeds. If you need to pay for downtown parking every day, this might be an issue, so take a close look at how your hometown pays its bills.

Celebrate freedom from taxation Many taxes are the result of spend- ing money, which makes them par- ticularly hard to predict unless you have a real handle on your everyday expenses, so take a bird’s-eye view of your spending habits. If you live in an area with a high sales tax on luxury items, will this impact you disproportionately? If you are in your car a lot, will a high gas tax hurt your wallet? Home property taxes are of

particular concern and can vary dra- matically across the country. Since they’re based on your home’s value, which tends to increase over time, they can escalate quickly. States like Texas tout low or no income tax but often have higher property taxes. A good source of information for

forecasting your tax bill is the local government’s fi nance department. You also can turn to the Tax Foun- dation (www.taxfoundation.org), known for its annual comparison of state-by-state taxes. Check out its Tax Freedom Day by state chart, which tells you which day of the year you will have theoretically earned enough to pay your taxes; in 2014, Louisiana reached the day fi rst, on March 30. Your tax bill probably won’t be the

main reason you live in San Diego, Boston, or Tempe, Ariz., but do your research so you won’t get surprised by a tax bill you can’t handle.

— Vera Wilson is a freelance writer based in North Carolina. Her last feature article for Military Offi cer was “Consider the Costs,” March 2015.

Worksheet Your estimated tax:

Income taxes: state ___________________ county _________________ city/town _______________

Capital gains ______________ Inheritance/estate _________ Sales tax __________________ Gasoline tax _______________

Property taxes: state __________________ county _________________ city/town ______________

Car _______________________ Utility tax ________________ Alcohol tax _______________ Other ____________________

Specific state and local taxes vary widely; this list is just a starting point. NOVEMBER 2015 MILITARY OFFICER 65