Why does the wealthiest man in America live in Washington?
The answer –– or at least part of it –– is in a report released this week by the Institute on Taxation and Economic Policy.
Washington’s tax system is the most disjointed in the nation, leaving rich residents — including Bill Gates, the country's richest — with more money in their pockets, and the poor with even less to scrape by on.
The wealthiest 1 percent in the state of Washington — who bring in an average income of $1.1 million — pay only 2.8 percent of their income toward state taxes. By comparison, that state's poorest 20 percent — earning an average income of $11,500 — shell out nearly 17 percent of their income to the government, according to the report.
In fact, Washington is one of nine states in the country without a personal income tax. Instead, it relies heavily on sales taxes, which often hit lower- and middle-income families the hardest, and property taxes.The breakdown:
Sales & Excise taxes: The report shows the state's wealthiest 1 percent annually pay 1.9 percent of their income in sales and excise taxes, while the poorest 20 percent pay 13 percent of their income toward the taxes. Middle class residents spend 8 percent of their income on sales and excise taxes on average.
Property Taxes: Property taxes make up the majority of the remaining tax tabs. The wealthiest 1 percent dish out about 1.4 percent of their income toward property tax bills, and the poorest pay close to 4 percent of theirs. Falling in between, the middle class spends about 2 percent of their income on property taxes.Good for business
In addition to being the perfect place for the wealthy to call home, Washington is also great for big business. The state was also ranked No. 6 as the best state for its business tax climate this year by The Tax Foundation.
Amazon and Microsoft headquarters are both on Washington soil. Amazon's Jeff Bezos –– and his estimated $23.2 billion fortune –– also lives there, along with Microsoft CEO Steve Ballmer and Microsoft co-founder Paul Allen.
The housing in the Seattle-Tacoma-Bellevue area –– the state's largest metropolis –– is also far less segregated by income than the housing in many Southwestern and Northeastern cities, according to a Pew Research Center report .
Following behind Washington in the report's "Terrible Ten" states with the largest gaps in taxes between the rich and poor were Florida, South Dakota, Illinois, Texas, Tennessee, Arizona, Pennsylvania, Indiana, and Alabama.
More From Business Insider
- 6 Myths Couples Should Stop Believing About Joint Bank Accounts
- 7 Signs You Might Be Living Beyond Your Means
- This Woman Is Shredding The Personal Finance Industry And We're Loving It
- Politics & Government