Much has been written about Amazon.com’s quest for its new headquarters (HQ2) since the tech giant and marketplace seller announced its plans last summer. While the discussion has primarily focused on the incentives packages offered by the HQ2 contenders, property tax and income tax considerations should not be forgotten.
With the company’s announcement that it plans to settle in both Crystal City, part of Arlington, Virginia, and Long Island City, in the Queens borough of New York City, potential candidates for the 50,000 new jobs may be wondering which location is right for them. Job-seekers will certainly look at each city’s culture, transportation, housing, and educational systems. However, they should also consider the tax bill on their income they may be facing from their new hometown at both the state and local level.
Housing options abound for employees at the Crystal City location, with workers commuting easily from the District of Columbia, Maryland, and, of course, Virginia. Of these three jurisdictions, Virginia is the most taxpayer friendly from a tax rates perspective, with a highest marginal income tax rate of only 5.75 percent and no local income taxes. Maryland's highest marginal income tax rate is also 5.75 percent, but the addition of its county income tax brings this rate up to 7.5 percent to 8.95 percent, depending on the county. DC’s highest marginal tax rate matches that of its Maryland neighbors, Montgomery County and Prince George’s County, at 8.95 percent.
New York employees should be prepared for an even higher income tax liability. New York imposes an income tax of up to 8.82 percent. This amount could go up by 2.7 percent to 3.4 percent, thanks to the New York City Personal Income Tax. Even moving to New Jersey won’t help these workers escape a double-digit tax rate. The state’s income tax rate tops out at 10.75 percent, making it one of the highest marginal tax rates in the nation.
Although living in Virginia is the clear winner when it comes to minimizing HQ2 employees’ tax bills, each city’s unique culture and their growth after Amazon’s investment in the area will make either location a sure bet for its new employees.
Continue the discussion on Bloomberg Tax's State Tax Group on LinkedIn: Do you weigh the income tax pros and cons when considering relocating to a new city?
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