The Institute on Taxation & Economic Policy has released the fourth edition of its report, “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States,” which claims that in almost all state tax systems, middle- and low-income families pay a greater share of their income in tax than wealthy families.
The report measures the state and local taxes paid by different income groups in 2013 (at 2010 income levels, including the impact of tax changes enacted through Jan. 2, 2013) as shares of income for every state and the District of Columbia. It discusses state tax policy features and includes detailed state-by-state profiles.
The report says that “virtually every state’s tax system is fundamentally unfair,” taking a much greater share of income from middle- and low-income families than from wealthy families.
Among the report’s other conclusions:
- Combining all of the state and local income, property, sales and excise taxes that state residents pay, the average overall effective tax rates by income group nationwide are 11.1 percent for the bottom 20 percent of the population, 9.4 percent for the middle 20 percent and 5.6 percent for the top 1 percent.
- In the 10 states that the report ranks as having the most regressive overall tax systems, the bottom 20 percent pay up to six times as much of their income in taxes as their wealthy counterparts.
- The report labels Washington State the most “regressive,” followed by Florida, South Dakota, Illinois, Texas, Tennessee, Arizona, Pennsylvania, Indiana and Alabama.
- Five of the 10 most regressive states derive roughly half to two thirds of their tax revenue from sales and excise taxes, compared to a national average of roughly one third. Five do not levy a broad-based personal income tax (four do not have any taxes on personal income and one state only applies its personal income tax to interest and dividends), while the other five have a personal income tax rate that is flat or virtually flat.