The rich are most likely to stay rich in these states. Here’s why

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If you’re wealthy in Florida or Tennessee, you’re more likely to stay wealthy.

 

Both states have zero to very little income tax. Meaning high-income residents pay the same in sales and property taxes as the poor. Personal finance site WalletHub crunched data of the three most-pressing tax burdens in 50 states: property, income and sales. Overall tax burdens are the worst in states with the lowest income taxes.

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Is it fair? Experts say no.

 

“The income tax tends to be the fairest tax, using a taxpayer’s ability to pay as the measure of fairness. Income is closely tied to a person’s ability to pay taxes,” Mary L. Heen, University of Richmond law professor told WalletHub. “This is more difficult to achieve with sales taxes.”

Of the top five states with the lowest tax burden, only Delaware has an income tax.

 

What it lacks in taxing the rich, it makes up for wealthy business owners. The “Diamond State” is known as a “tax haven,” where business owners evade taxes and stakeholders keep more of their profits.

Regression in a progressive country

Experts argue having everyone pay the same in sales or property taxes makes it easier for low-income earners to slip into poverty.

 

It makes for an uneven playing field. When someone earning more than a six-figure salary pays the same sales tax as someone who earns $20,000 annually, the latter is more likely to struggle financially than the former.

 

“The burden of sales taxes falls much more heavily on lower-income taxpayers, a result that violates fundamental fairness norms,” Heen said. “Although sales taxes can be structured to provide exemptions or lower rates for the purchase of basic necessities, such as food, medicine, or certain essential services, these types of offsetting adjustments tend to introduce problematic inefficiencies into the system. In sum, primary reliance on sales taxes for state and local revenues results in a more regressive tax system.”

 

Find out: Understanding Income Tax Brackets

A growing income gap

A 2015 study by economists at the Federal Reserve explored how income taxes in states like Florida and Tennessee contribute to a “widening income gap.”

 

The study says, “Income inequality has risen dramatically in the United States since at least 1980.” The majority of the country does follow a progressive tax system: Higher-income earners pay more in income but lawmakers in states like Florida and Tennessee have made it a mission to avoid the tax.

 

The Florida Policy Institute, a nonpartisan, nonprofit organization dedicated to improving economic mobility, has noted the “Sunshine State’s” tax system is “among the most regressive in the country.”

 

In 2018, the organization published a joint study with the Institute on Taxation and Economic Policy that found “the lowest-income Floridians – those earning less than $18,700 – pay five and a half times as much in taxes as a share of their household income than the state’s wealthiest residents, or those earning upwards of $548,700.”

 

The tax burden may indeed be among the lowest in the country. But Meg Wiehe, deputy director of ITEP and an author of the study, says the effects have been significantly damaging to lower-income earning residents.

 

“Rising income inequality is unconscionable, and it is certainly a problem that local, state and federal lawmakers should address,” Wiehe said. “State lawmakers have control over how their tax systems are structured. They can and should enact more equitable tax policies that raise adequate revenue in a fair, sustainable way.”

 

This article originally appeared on Debt.com and was syndicated by MediaFeed.org.

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The US city that Boomer homebuyers are flocking to

 

Baby boomers are the wealthiest generation of Americans alive today, according to the latest Federal Reserve data, and plenty are still looking to buy homes.

But where are baby boomers looking to buy? To answer this question, LendingTree analyzed mortgage purchase requests made in 2020 on the LendingTree platform across the nation’s 50 largest metropolitan areas (metros).

What LendingTree found was that baby boomers (defined as anyone born between 1946 and 1964) make up a significant portion of potential homebuyers in many of the country’s largest metros.

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LendingTree used generational definitions, from the Pew Research Center, to define the age range for baby boomers as being born between 1946 and 1964.

Metropolitan statistical area (MSA) rankings were generated by looking at the percentage of total purchase mortgage requests received by LendingTree from baby-boomer borrowers. The larger the share of requests from baby boomers, the higher ranking a metro area received.

Borrower data was derived from mortgage requests and offers given to users of the LendingTree mortgage shopping platform across the nation’s 50 largest metropolitan areas from Jan. 1, 2020, to Dec. 31, 2020.

 

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In general, baby boomers tend to have stronger financial profiles than those of younger generations, but that doesn’t mean that they don’t need to carefully plan before buying a home.

Here are some tips for baby boomers looking to buy a home:

  • Consider how it will impact your retirement. If you’re thinking about buying a house while you’re nearing or at retirement age, you’ll want to carefully consider how costs associated with that house will impact you when you’re no longer working. For example, if you pay with cash, ask yourself if you will be able to afford property taxes or other annual fees. If you decide to take out a loan, consider whether or not you’ll be able to make your monthly payments.
  • Look into different loan programs. There are many different loan programs that could be beneficial to you depending on your financial profile. For example, if you’re an older baby boomer you might be able to qualify for a retirement mortgage, which can help you get around income requirements that you’re likely to find with other loans.
  • Pay down your monthly debts. If you decide to purchase a home with a loan, lenders look carefully at your debt-to-income (DTI) ratio, the percentage of your gross monthly income that goes toward recurring debts. Maximum DTI ratios vary by loan program, however, so it’s a good idea to keep your total DTI ratio (which includes your monthly mortgage and all debt payments) at 43% or less. Even if you plan on paying with cash, it’s a good idea to pay off as much debt as you can so you have extra money for housing-related costs.

 

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  • Share of mortgage requests coming from baby boomers: 10.28%
  • Average baby boomer age: 62.5
  • Average credit score among baby boomers: 677
  • Average down payment amount among baby boomers: $45,644
  • Average requested loan amount among baby boomers: $224,083

 

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  • Share of mortgage requests coming from baby boomers: 10.38%
  • Average baby boomer age: 62.2
  • Average credit score among baby boomers: 689
  • Average down payment amount among baby boomers: $57,105
  • Average requested loan amount among baby boomers: $260,750

 

istockphoto/Vito Palmisano

 

  • Share of mortgage requests coming from baby boomers: 10.49%
  • Average baby boomer age: 62.3
  • Average credit score among baby boomers: 693
  • Average down payment amount among baby boomers: $97,495
  • Average requested loan amount among baby boomers: $423,968

 

istockphoto/shalunts

 

  • Share of mortgage requests coming from baby boomers: 10.60%
  • Average baby boomer age: 61.8
  • Average credit score among baby boomers: 685
  • Average down payment amount among baby boomers: $44,823
  • Average requested loan amount among baby boomers: $225,762

 

istockphoto/Mark Howard

 

  • Share of mortgage requests coming from baby boomers: 10.65%
  • Average baby boomer age: 62.1
  • Average credit score among baby boomers: 682
  • Average down payment amount among baby boomers: $34,531
  • Average requested loan amount among baby boomers: $173,498

 

 

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  • Share of mortgage requests coming from baby boomers: 10.67%
  • Average baby boomer age: 62.1
  • Average credit score among baby boomers: 667
  • Average down payment amount among baby boomers: $39,789
  • Average requested loan amount among baby boomers: $214,220

 

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  • Share of mortgage requests coming from baby boomers: 10.84%
  • Average baby boomer age: 62.2
  • Average credit score among baby boomers: 674
  • Average down payment amount among baby boomers: $42,830
  • Average requested loan amount among baby boomers: $217.053

SPONSORED: Find a Qualified Financial Advisor

1. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes.

2. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.

 

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  • Share of mortgage requests coming from baby boomers: 10.89%
  • Average baby boomer age: 62.3
  • Average credit score among baby boomers: 692
  • Average down payment amount among baby boomers: $58,762
  • Average requested loan amount among baby boomers: $282,576

 

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  • Share of mortgage requests coming from baby boomers: 10.92%
  • Average baby boomer age: 61.6
  • Average credit score among baby boomers: 662
  • Average down payment amount among baby boomers: $30,158
  • Average requested loan amount among baby boomers: $192,342

 

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  • Share of mortgage requests coming from baby boomers: 10.96%
  • Average baby boomer age: 62.6
  • Average credit score among baby boomers: 681
  • Average down payment amount among baby boomers: $41,749
  • Average requested loan amount among baby boomers: $209,718

 

istockphoto/Sean Pavone

 

  • Share of mortgage requests coming from baby boomers: 11.62%
  • Average baby boomer age: 62.2
  • Average credit score among baby boomers: 666
  • Average down payment amount among baby boomers: $34,208
  • Average requested loan amount among baby boomers: $180,679

 

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  • Share of mortgage requests coming from baby boomers: 11.63%
  • Average baby boomer age: 61.9
  • Average credit score among baby boomers: 671
  • Average down payment amount among baby boomers: $44,295
  • Average requested loan amount among baby boomers: $247,038

 

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  • Share of mortgage requests coming from baby boomers: 11.70%
  • Average baby boomer age: 62.6
  • Average credit score among baby boomers: 674
  • Average down payment amount among baby boomers: $40,399
  • Average requested loan amount among baby boomers: $213,417

 

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  • Share of mortgage requests coming from baby boomers: 11.97%
  • Average baby boomer age: 62.1
  • Average credit score among baby boomers: 694
  • Average down payment amount among baby boomers: $48,934
  • Average requested loan amount among baby boomers: $239,478

 

SeanPavonePhoto/istockphoto

 

  • Share of mortgage requests coming from baby boomers: 12.12%
  • Average baby boomer age: 62.3
  • Average credit score among baby boomers: 676
  • Average down payment amount among baby boomers: $41,479
  • Average requested loan amount among baby boomers: $204,111

 

Sean Pavone / istockphoto

 

  • Share of mortgage requests coming from baby boomers: 12.46%
  • Average baby boomer age: 62.4
  • Average credit score among baby boomers: 685
  • Average down payment amount among baby boomers: $59,287
  • Average requested loan amount among baby boomers: $285,923

 

istockphoto/Chris LaBasco

 

  • Share of mortgage requests coming from baby boomers: 13.19%
  • Average baby boomer age: 61.9
  • Average credit score among baby boomers: 665
  • Average down payment amount among baby boomers: $38,683
  • Average requested loan amount among baby boomers: $226,908

 

eurobanks/ istockphoto

 

  • Share of mortgage requests coming from baby boomers: 13.20%
  • Average baby boomer age: 62.6
  • Average credit score among baby boomers: 702
  • Average down payment amount among baby boomers:  $91,017
  • Average requested loan amount among baby boomers: 4409,620

 

istockphoto / Jerry Uomala

 

  • Share of mortgage requests coming from baby boomers: 13.27%
  • Average baby boomer age: 62.5
  • Average credit score among baby boomers: 684
  • Average down payment amount among baby boomers: $43,025
  • Average requested loan amount among baby boomers: $218,010

 

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  • Share of mortgage requests coming from baby boomers: 13.73%
  • Average baby boomer age: 62.7
  • Average credit score among baby boomers: 683
  • Average down payment amount among baby boomers: $53,586
  • Average requested loan amount among baby boomers: $276,202

 

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  • Share of mortgage requests coming from baby boomers: 13.95%
  • Average baby boomer age: 62.8
  • Average credit score among baby boomers: 687
  • Average down payment amount among baby boomers: $46,364
  • Average requested loan amount among baby boomers: $219,520

 

Philip Rozenski / istockphoto

 

  • Share of mortgage requests coming from baby boomers: 15.26%
  • Average baby boomer age: 62.5
  • Average credit score among baby boomers: 697
  • Average down payment amount among baby boomers: $63,759
  • Average requested loan amount among baby boomers: $269,351

 

DepositPhotos.com

 

  • Share of mortgage requests coming from baby boomers: 16.36%
  • Average baby boomer age: 63.2
  • Average credit score among baby boomers: 693
  • Average down payment amount among baby boomers:  $54,342
  • Average requested loan amount among baby boomers: $264,800

 

istockphoto/Sean Pavone

 

  • Share of mortgage requests coming from baby boomers: 17.33%
  • Average baby boomer age: 62.9
  • Average credit score among baby boomers: 690
  • Average down payment amount among baby boomers: $41,341
  • Average requested loan amount among baby boomers: $196,524

 

Gabriele Maltinti / istockphoto

 

  • Share of mortgage requests coming from baby boomers: 19.97%
  • Average baby boomer age: 63.2
  • Average credit score among baby boomers: 681
  • Average down payment amount among baby boomers: $52,262
  • Average requested loan amount among baby boomers: $263,256

LendingTree senior research analyst Jacob Channel contributed to this report.

This article originally appeared on LendingTree.com and was syndicated by MediaFeed.org.

 

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