A recently released study by a private online financial research company ranks the village of Richfield second in determining which Wisconsin communities are the most tax-friendly places for retirees.
The study was conducted by SmartAsset, a company that describes its mission as working to improve the public’s ability to understand and make significant personal wealth and risk management decisions.
“Richfield had the lowest effective property tax rate of all locations considered for Wisconsin, which helped it rank second in the state for retirement tax friendliness,” said SmartAsset Senior Editor Ross Urken, who helps oversee research for such studies.
Richfield Village Administrator Jim Healy called the announcement “wonderful news.”
“What the Village Board has strategically identified long ago as one of its key organizational goals is striking the balance between growing from a ‘town’ to a ‘village’ while financing the core levels of service delivery our residents have come to expect,” Healy said. “That means treating each taxpayer dollar as if it truly were our own, living within our budgetary constraints by saving for large capital expenditures over time and historically avoiding the need to borrow money which, ultimately, raises the cost of living. This type of national recognition is something our village organization and most importantly, our taxpayers, can be very proud of.”
Steve Sabato, also of SmartAsset, said in the company’s fourth annual study researchers analyzed sales, property, income, fuel and Social Security tax data to rank locations on how friendly they are for retirees. According to the study, Mequon was ranked first in the state with a tax friendliness index of 21.88, Richfield’s index rating was 21.33. That was followed by Delafield, ranked third with a 21.06 index rating, Pewaukee was fourth with a ranking of 20.51, fifth was Hartland with a 20.27 ranking, Hudson was sixth with 19.66, Brookfield was seventh with 19.29, Muskego was eighth with 18.71, Lake Hallie was ninth with 18.61 and Oconomowoc was 10th with an index rating of 18.29. Urken said SmartAsset releases studies “like this to get people talking and thinking about topics like taxes and retirement.”
“We hope this information helps people add a little local context to the decisions they make about their personal finances,” Urken said. “Our study aims to find the areas with the most tax-friendly policies for retirees. To do that we looked at how the tax policies of each city would impact a retiree with a $50,000 income. Our hypothetical retiree is getting $15,000 from Social Security benefits, $10,000 from a private pension, $15,000 from retirement savings like a 401(k) or IRA and $10,000 in wages.”
Urken said to calculate the expected income tax this person would pay in each location SmartAsset applied deductions
and exemptions. “This included the standard
deduction, personal exemption and deductions for each specific type of retirement income. We then calculated how much this person would pay in income tax at the federal, state, county and local levels,” Urken said. “We calculated the effective property tax rate by dividing median property tax paid by median home value for each city.
“In order to determine sales tax burden we estimated that 35 percent of take-home (after-tax) pay is spent on taxable goods,” Urken said. “We multiplied the average sales tax rate for a city by the household income less income tax. This product is then multiplied by 35 percent to estimate the sales tax paid.”
Urken said for each municipality they determined whether or not Social Security income was taxable.
“Finally, we created an overall index weighted to best capture the taxes that most affect retirees. We gave a 4 times weighting to income tax, 3 times weighting to the property tax rate, a 2 times weighting to the sales tax and 1 times weighting to fuel taxes,” Urken said.
Healy said the juxtaposition of being named one of the lowest taxed municipalities in the state while simultaneously the Board is actively discussing the potential for an increase in property taxes to help fund the cost of improving 150 miles of road is “interesting timing to say the least.”
“However, because the village’s tax rate is so low, even with a modest increase to help fund the cost of our needed infrastructure improvements, we are still well-positioned to continue to be in that conversation for years to come with the fiscal restraint traditionally exhibited by this current Village Board and the Boards of the past,” Healy said.
This article provided by NewsEdge.