At Good Jobs First we tend to focus on the ways that corporations get special tax deals from state governments, so it is helpful to be reminded that wealthy individuals also pay far less than their fair share. A definitive statement of this fact has just been published by our friends at the Institute on Taxation & Economic Policy in the latest edition of their report Who Pays.
The injustice of state taxation is summed up in the main finding of the report: “virtually every state’s tax system is fundamentally unfair, taking a much greater share of middle- and low-income families than from wealthy families.”
At a time when a number of red states are talking about replacing their personal income tax (PIT) systems with higher sales taxes, ITEP points out that the over reliance on consumption taxes (along with the absence of a graduated PIT) is a big part of the regressivity problem in many states.
ITEP notes that five of most regressive states—Washington, Florida, South Dakota, Illinois and Texas—derive half to two thirds of their revenue from sales and excise taxes, compared to a national average of about one third. The least regressive systems, by the way, are those in Delaware, the District of Columbia, New York, Oregon and Vermont.
Although the report does not focus on the corporate portion of state income taxes, it points out: “More than ten states gave away big breaks to profitable corporations either through rate cuts, a change in the apportionment formula used to calculate the corporate income tax, expanded exclusions, or the reduction or elimination of personal property taxes. These states include Arizona, Alabama, Florida, Idaho, Louisiana, Michigan, Missouri, North Dakota, Pennsylvania, and Wisconsin.”