For many Americans, April 15 — Tax Day — is their least favorite day of the year. In 2009, Americans paid $866 billion in taxes to the federal government. The top 1% of earners — those making more than $343,927 — paid 36.7% of that figure. The bottom 50%, those who earned less than $32,396, paid $19 billion in taxes. Regardless, taxes affect people of all income levels.
Where people live can greatly affect their tax bill. States — and even counties and cities — levy taxes differently. In addition to the federal tax, 41 states and the District of Columbia also collect taxes on income. Cities and/or counties may add their own income tax on top of the state rate. Counties collect property taxes at rates that vary immensely across the U.S.
Many people who have complicated investments and assets will hire a good CPA to prepare their taxes for them. People with less complicated finances may use software to prepare their own taxes. Who uses tax preparation software, and where do they live?
Federal income taxes affect almost everyone, but state income taxes (and even local in some areas) can affect area populations. For example, Oregon and Hawaii tax top wage earners at the nation’s highest rates. In Oregon, people making more than $250,000 are taxed at 11%. In Hawaii, the 11% tax bite affects those who earn more than $200,000 per year.
As noted above, nine states have no state income tax. The states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. New Hampshire and Tennessee collect state taxes on income earned from interest and dividends, but not wages.
Several states also have flat tax rates — treating all income levels equally. They are Colorado, Illinois, Indiana, Massachusetts, Michigan, Pennsylvania and Utah. Their tax rates vary from 3.07% to 5%.
Explore this interactive map to learn more about state income taxes:
Commercial and residential property taxes are a significant income source for counties. Funds collected from these taxes pay for schools, roads, fire departments and more. The amount that a property owner pays is based on either the purchase price of the property (as in the state of California) or on the current value of the property (like in Oregon). The amount differs widely by county.
Several counties in New York have the highest property tax rates per $1,000 of property value. Orleans County, N.Y., has the nation’s highest median rate at $30.47 per $1,000 of property value, followed by Niagara County, N.Y., and Monroe County, N.Y.
Prince of Wales-Hyder Census Area in Alaska has the lowest property rate at $0.826 per $1,000 of property value.
Overall, the highest property tax rates are in the Northeast, Midwest and the state of Texas. The West and South have among the lowest rates.
Explore this interactive map that shows median property tax rates by county:
Click on image to enlarge interactive map
Many Americans prefer to save money by preparing their own taxes instead of hiring a professional. While those with simple financial situations can fill out their forms manually; those with more complicated finances prefer to use tax-preparation software. Different software options include Intuit’s TurboTax®, H&R Block Tax Software® and TaxACT®.
Households in ZIP codes 28547 (Camp Lejeune, N.C.), 42223 (Fort Campbell, Tenn.), 66027 (Fort Leavenworth, Kan.) and 76544 (Fort Hood/Killeen, Texas) are twice as likely as the average American to use tax-preparation software. All of these ZIP codes are near military bases.
Who is most likely to use tax preparation software? Esri has developed the Tapestry Segmentation system that classifies U.S. residential neighborhoods into 65 unique market segments based on socioeconomic and demographic characteristics.
Residents of Military Proximity neighborhoods are twice as likely as the average American to use tax-preparation software. Residents of Military Proximity neighborhoods depend upon the military for their livelihood. Most of the labor force is in the armed forces, while others work in civilian jobs on military bases. The median household income is $38,795; the median age is 22.5 years.
Residents of Boomburbs, Connoisseurs, Exurbanites, Sophisticated Squires, Suburban Splendor, Top Rung, Up and Coming Families and Urban Chic are also likely users of tax-preparation software. These are affluent, well-educated neighborhoods.
Residents of Modest Income Homes neighborhoods are the least likely to use tax-preparation software. These neighborhoods are primarily in older suburbs of metropolitan areas. Singles, single parents and family types live in single-family housing. The median age is 36.3 years and the median household income is $19,695. These frugal types shop at discount stores, won’t pay to go online, and rarely eat out.
Why this matters
Taxes greatly affect the spending power of people in their communities. However, collecting tax revenues is also necessary for governments at all levels to provide essential services and programs that benefit the maximum number of citizens. Agencies can use information about where taxes are generated to help make decisions about where and how to allocate funds to maximize benefits.
Understanding who uses tax software is important to a number of constituencies. For example, software developers need to know the types of consumers who would buy and use their product, and where they are located to best market and distribute their product. Tax accountants can also use this information in order to market their services to individuals who may need their services or target those who are currently using tax-preparation software.
Pam Allison is a digital media, marketing strategist and location intelligence consultant. You can visit her blog at www.pamallison.com.