Any state or city that wishes to prosper should welcome, embrace and nurture its older generations and offer them tax breaks. Simply look at Florida, Alaska, Nevada, South Dakota, Texas, Washington and Wyoming whose favourable tax policies related to retirement income attract and retain older residents reliably and consistently. Pennsylvania, Alabama, Hawaii, Illinois, Iowa, Mississippi, New Hampshire and Tennessee do this too to a degree by not taxing pensions. Illinois, Pennsylvania, and Mississippi don’t tax IRA or 401k plans. Many states don't tax estates.
Of course these states have to compensate for this lost revenue. There is no free lunch anywhere. Alaska, South Dakota and Wyoming tax natural resource producers, mostly oil-related....the rest of us pick up the tab for that as those companies simply price that into the end product that we end up paying for. States with natural resources have a big advantage.
Florida makes up with its sales tax that generates about 80% of the lost revenue, almost 140 million annual visitors/tourists seeking sunshine (a type of natural resource) helps! Miami Beach hotel tax is about 13%. Yes, spending can make up for lost revenues. Eliminate spenders? Not smart! The assumption is that older people don't spend that much (in 1984, Americans 75 and older spent just half what those 25-34 year of age did). By 2023, that leapt to nearly 80%. Innovation derived prosperity rules. Longer lifespans and increased retirement ages mean older generations earn and spend more. Yes, the 75-plus crowd only spends 59% of what the 45 - 54 year olds do (America’s highest spending bracket). But that’s well above 1984’s 39%. (NY Post)
Maybe higher tax states like New York, New Jersey and California should initiate a big tax break for those 65-plus? I bet they would easily compensate for the lost income tax revenue with sales tax revenues and keep older folks from leaving their states and spending! That may seem unfair to others, but maybe it's time to be practical and keep local spenders from leaving for other states?
