A new report finds that every state tax system, with the exception of the District of Columbia, taxes its poorest residents at significantly higher tax rates than the wealthiest 1 percent of taxpayers.
The report, from the Institute on Taxation and Economic Policy, is the fifth edition of the nonprofit research organization’s "Who Pays?" report examining tax systems in all 50 states and the District of Columbia.
The report found that the lowest-income 20 percent of taxpayers pay an average state tax rate of 10.9 percent, as opposed to 5.4 percent for the top 1 percent of taxpayers.
When all state and local income, property, sales and excise taxes that Americans pay are considered in combination, the nationwide average effective state and local tax rates by income group are 10.9 percent for the poorest 20 percent of individuals and families, 9.4 percent for the middle 20 percent and 5.4 percent for the top 1 percent.
In the 10 states with what the researchers consider to be the most regressive tax structures, the bottom 20 percent pay up to seven times as much of their income in taxes as their wealthy counterparts. Washington State is the most regressive, according to the report, followed by Florida, Texas, South Dakota, Illinois, Pennsylvania, Tennessee, Ari¬zona, Kansas, and Indiana.
Six of the 10 most regressive states get approximately half to two-thirds of their tax revenue from sales and excise taxes, compared to a national average of about one-third. The report noted that five of those states 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 four have a personal income tax rate structure that is flat or virtually flat.
The authors of the report believe that state personal income taxes are typically more progressive than the other taxes that states levy, such as property and consumption taxes. Sales and excise taxes are the most regressive, with poor families paying nearly eight times more of their income in these taxes than wealthy families, while middle-income families pay¬ five times more. Property taxes are typically regressive as well, according to the report, but less so than sales and excise taxes.
The report is available here.