You’ve heard this from me for years:
For many of us, climate change will soon make it beneficial to relocate. You could avoid physical threats like storm surge, river flooding, drought, and sea level rise that will lower, maybe crash, the value of your home. And you can dodge financial threats like a climate-driven local tax rise, a declining job market, or growing health problems.
But you haven’t heard me say this!
Relocating can lower your federal taxes!
You may think that can’t be true. Federal tax rates are the same for everyone, right? So how could your federal taxes be lower if you lived somewhere else? Consider this example, taken from my book:
You and your recent classmate are both nurses. You have roughly the same experience, the same duties. You make $94,000. He makes $61,000.
Is that unfair?
Not in the direction you may think. Your classmate works at Mercy Medical Center in Des Moines. You are at Santa Clara Valley Medical Center in San Jose. Your rent is $1,538/mo; his is $586 for a similar apartment and neighborhood. Yes, you earn 54 percent more than he does, but you pay nearly three times as much for housing.
Your monthly energy costs are $280; his are $145. An electrician’s visit costs $218 in San Jose; $65 in Des Moines. You get the idea. When everything is counted up, you would need to earn $105,000, not $94,000, to afford the same life your classmate in Des Moines can have for $61,000. He’s better off than you.
And here’s the kicker: because your earnings are higher and push you into a higher tax bracket, you pay federal taxes of $17,099 while he sends in $8,849. For the same lifestyle! Most U.S. taxpayers don’t understand that where they live affects how much they send to the IRS. But now you do.
If you think moving to a safer hometown will force you to take a pay cut, that alone shouldn’t be a plan-killer. If you’re avoiding climate costs, reducing your cost of living, and dropping your federal taxes – you might still come out ahead.