States find lower
taxes mean growth

Hawaii ranked 31st
in magazine survey

State by state

By Mary Deibel
Scripps Howard News Service

Bill Hoffman never dreamed he and his wife, Joanne, would be in the vanguard of retirees who helped make Nevada the fastest growing state when they moved from California to escape high taxes and stretch their retirement savings.

"Nevada isn't as tax-friendly as I'd like, but almost anywhere is more friendly than California when it comes to taxation," says Hoffman, 69, a former aerospace engineer.

Nevada's no-income-tax status gets credit for helping fuel the explosive growth of a state once associated with gambling, Wayne Newton, quickie weddings and divorce.

Now Nevada tops the list of boom states, with 66 percent population growth in the last decade, according to Census 2000. The Census Bureau reports Nevada was followed by fellow low-tax states Arizona (40 percent growth), Colorado (31 percent) and Utah (30 percent).

No surprise, either, that those four states rank as "wealth-friendly" states that let you hold onto more of your money in Bloomberg Personal Finance magazine's new rating of all 50 state tax systems by the way four typical families would fare.

Topping Bloomberg's list for taking the tiniest tax bite is Wyoming, yet it came in 33rd on the Census Bureau's growth list at 8.9 percent. The national average for states was 13.2 percent growth over the decade.

"No survey can measure the intangible assets of community or culture," says Bloomberg Personal Finance editor Steve Gittelson.

Other states making the wealth-friendly top 10 are Tennessee, Nevada, Washington, Alaska, Florida, South Dakota, Louisiana, Alabama and Texas in descending order.

As Nevada Gov. Kenny Guinn has discovered from his vantage point in Carson City, where growth was 29.7 percent, the 80-percent population explosion in and around Las Vegas isn't likely to be sustained -- at least not at low tax levels -- given the stress and strain that growth puts on roads, water supplies, sewerage and schools.

Experts say families looking to relocate in the next few years may want to consider communities that are financially vital but perhaps not boomtowns, which get tax and service pressure.

San Diego financial planner Ken Stern, author of "50 Fabulous Places to Retire," says that tax burdens are only one factor for the 500,000 Americans 55 and older who retire each year and move out of the state where they spent their working lives.

Taxes, housing expenses and cost of living are top reasons to relocate, Stern says, but scenic beauty, good weather; culture, recreation and entertainment opportunities, quality medical care and access to highways and airports for quick getaways also count.

So does a strong state and local economy. Today, 25 percent of retirees are working and that number will grow -- most of the 76 million baby boomers say they plan to work at least part-time well into their 70s.

Ronald Lee, head of the Center for the Demography and Economics of Aging at the University of California-Berkeley, predicts average life expectancy will be 87 by 2070 with many boomers living to 100 or more. For them, Lee has one rule of thumb for making wealth last until you die: Spend 1 percent less every year than you did the year before.

To reach that goal, retirement expert Olivia Mitchell of University of Pennsylvania' Wharton School says, "We may be redefining retirement to mean quitting your longtime job and changing careers," either where you spent your work life or in a new environment.

To stretch their retirement income, the Hoffmans led a tax revolt after California chased them to Nevada and hit them with an income tax bill for the retirement money they earned during their California working years.

Angered at California's aggressiveness in tracking millions of former residents, the Hoffmans and other retirees, backed by Nevada and other low-tax retirement havens, got Congress to stop states from hunting down former residents and their pensions. Corporate America backed the change, too, because former bosses faced administrative nightmares figuring out where retirement benefits were "earned" by employees who may have moved four or more times during their careers.

Looking back Bill Hoffman says the fight was worth it and so were the tax savings.

"It's certainly better than putting in all that effort with nothing to show for it," he says.

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Population gains mirror
wealth-friendly status

Census 2000 suggests that many boom states were also wealth-friendly in the last decade with their low taxes proving a magnet for many newcomers.

The wealth-friendly rankings below compare how four typical families defined by the Federal Reserve Board's household wealth survey would fare overall under tax systems for each of the 50 states and the District of Columbia.

A separate ranking also was done for retirees according to whether states tax Social Security benefits and government employee and military pensions, and offer other tax breaks to retirees.

State		Census growth	Wealth-friendly rank
		1990-2000	Overall	Retirees
1. NV		66 %	3	5
2. AZ		40	14	12
3. CO		31	12	18
4. UT		30	15	26
5. ID		29	41	38
6. GA		26	27	28
7. FL		23.5	6	8
8. TX		23	10	25
9. NC		21	40	16
10. WA		21	4	4
11. OR		20	46	40
12. NM		20	21	35
13. DE		18	11	6
14. TN		17	2	3
15. SC		15	29	19
16. VA		14	22	24
17. AK		14	5	9
18. CA		14	39	15
19. AR		14	31	17
20. MT		13	50	49
21. MN		12	44	48
22. NH		11	13	37
23. MD		11	18	22
24. MS		10.5	20	10
25. AL		10.1	9	7
26. KY		9.7	35	13
26. IN		9.7	17	21
26. OK		9.7	33	27
29. WI		9.6	47	50
30. MO		9.3	25	39
31. HI		9.3	30	14
32. NJ		8.9	34	32
33. WY		8.9	1	1
34. IL		8.6	28	31
35. KS		8.5	37	44
35. SD		8.5	7	11
37. NE		8.4	42	47
38. VT		8.2	45	46
39. MI		6.9	24	34
40. LA		5.9	9	2
41. NY		5.5	49	45
41. MA		5.5	32	30
43. IA		5.4	36	33
44. OH		4.7	26	20
45. RI		4.5	51	51
46. ME		3.8	48	43
47. CT		3.6	38	42
48. PA		3.4	19	23
49. WV		0.8	23	41
50. ND		0.5	16	36
51. DC		-5.7	43	29

Source: Bloomberg Personal Finance magazine