Most States Have Tax Codes That Are Rigged To Benefit The Wealthy: Report

A sweeping new analysis of taxes across the country reveals that in four out of every five states, the top 1% are paying a lower tax rate than their middle-class and low-income neighbors.

Instead of taxing wealthy residents an equal share, the vast majority of states are filling their budget gaps with taxes that disproportionately burden lower-income families, according to a report by the nonpartisan Institute on Taxation and Economic Policy, titled “Who Pays?”

“When we look at how states are taxing their residents, it’s clear they’re falling very far short of what most people consider to be a fair tax code,” said Carl Davis, ITEP’s research director.

In the top 10 states with the most regressive systems — Florida, Washington, Tennessee, Pennsylvania, Nevada, South Dakota, Texas, Illinois, Arkansas and Louisiana — the middle 60% of families pay an average of twice as much of their income in taxes as the top 1%, and the poorest 20% of residents pay an average of three times as much as the very wealthiest.

Thirty-four states tax low-income households at a higher rate than every other group.

“The core problem is not that complicated,” Davis said. “The problem is that state and local governments are raising most of their tax revenue from regressive taxes on what people buy, or the homes that they own or rent, and those expenses swallow up a larger share of income for low- and middle-income people.”

The report is the most comprehensive picture available of the overall share of income that families pay in state and local taxes across all 50 states and the District of Columbia. It examined not only income taxes but also taxes on goods, services, sales, fuel, property — even obscure levies such as South Dakota’s snowmobile