Residents of Portland, Oregon are only a matter of a handful of miles across the Columbia River from a completely different tax regime, in Washington. Does it make any sense to move to Washington for retirement or when selling a business, to save on taxes? We have spent some time on this notion and here are some differences that could compel a decision one way or another:
Washington:
No income tax
Property tax rates range from about 1.10% of RMV in Clark Co to 1% if you move into King Co where Seattle is
Sales taxes in Clark Co are roughly 7.4% to 8.4% depending on where in the Co you live, with some exclusions for food, drugs, and so forth
Car registration fees are substantial, and based on value of vehicle; a $25,000 car registered in 2016 cost about $550 in addition to the regular registration fee of around $30.
Health care costs can be substantial if you must use the Obamacare exchanges as Washington has had a difficult time generating participation by insurance companies. We don’t have exact numbers here, but be certain to check these costs before you move across the River.
Inheritance taxes start at $2,193,000.
If you are moving a business to Washington, be sure to check licensing fees and the business and occupation tax, which is based on gross receipts.
Oregon:
Hefty income tax, with a top rate of 9.9%. Social Security is exempt, and there is a small credit for taxes on pension income.
Property tax rates are similar to Washington, slightly higher in Multnomah County at 1.13%.
No sales tax.
Car registration is a flat fee for licensing, in the $100-$200 range depending on the plates you want.
Inheritance taxes start at only $1 million.
If your business in Oregon is a C-corp or an LLC treated as a corporation, you will pay an excise tax of 6.6% to 7.6% in Oregon on income.
Given these differences, it appears that owners of large estates or those who may be subject to substantial required minimum distributions from pension or IRA accounts could profit from a move to Washington state, thereby sheltering income and assets from these taxes. There may be other situations when a move could make sense; but consult with your tax advisor!