January 26, 2015

West Hawaii Today: How Progressive Is Our Tax System

media mention

On Jan. 15, the Institute on Taxation and Economic Policy (ITEP) released a report ranking the states in terms of how progressive their tax systems are. A “progressive” tax system is one that asks wealthier taxpayers to pay more of their income than poorer taxpayers. Most states rely upon some form of net income tax and some form of sales tax. Sales taxes tend to have flat rates and, therefore, are regressive. Income taxes tend to have brackets, with taxpayers with higher incomes are exposed to higher tax rates and are progressive.

ITEP’s study concluded that virtually every state tax system is “fundamentally unfair,” in that it takes a much greater share of income from low- and middle-income families than from wealthy families.

Hawaii didn’t make the Terrible 10, but wasn’t that far behind: It was ranked No. 15 (from the bottom).

On Jan. 15, the Institute on Taxation and Economic Policy (ITEP) released a report ranking the states in terms of how progressive their tax systems are. A “progressive” tax system is one that asks wealthier taxpayers to pay more of their income than poorer taxpayers. Most states rely upon some form of net income tax and some form of sales tax. Sales taxes tend to have flat rates and, therefore, are regressive. Income taxes tend to have brackets, with taxpayers with higher incomes are exposed to higher tax rates and are progressive.

ITEP’s study concluded that virtually every state tax system is “fundamentally unfair,” in that it takes a much greater share of income from low- and middle-income families than from wealthy families. Combining all state and local income, property, sales and excise taxes that Americans pay, 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.

The 10 states with the most regressive tax structures, which they call “the Terrible 10,” the bottom 20 percent pay up to seven times as much of their income in taxes as their wealthy counterparts.

Hawaii didn’t make the Terrible 10, but wasn’t that far behind: It was ranked No. 15 (from the bottom).

Read more



Share