Who Pays?

Years of efforts to reform Louisiana’s regressive and overly complicated tax code have run aground in the state Legislature. The result: Louisianans pay the second-highest sales taxes in the nation, while the tax code is riddled with costly exemptions and deductions. The state’s broken tax structure is a major reason why the state lurched from budget crisis to budget crisis over the last decade and has struggled to fund critical programs and services like higher education and health care. The Advocate’s editorial board shares its thoughts on the latest report from the Institute on Taxation and Economic Policy. 

Louisiana’s upside-down tax structure means the highest income-earners pay less than the poorest families, when measured as a percentage of income. The Institute on Taxation and Economic Policy’s  “Who Pays” report lays this out in careful detail, and the latest edition breaks down the tax distribution by race. The conclusion: Black households pay a higher percentage of their income in state and local taxes than white households. Louisiana has work to do to make the tax structure fairer and reduce racial inequalities.

Poor and middle-income families in Louisiana pay state and local taxes at a higher rate than the wealthiest families. That’s the key takeaway from the latest state-by-state breakdown of tax distribution by income groups from the Institute on Taxation and Economic Policy (ITEP). Louisiana’s tax structure is the 14th most regressive in the nation.

The biggest drivers of the inequality in Idaho are the sales and property taxes. In every bracket of income measured by the Institute’s report, the amount that families paid in state and excise taxes went down as their total income increased. The lowest-earning 20 percent spent twice as much of their annual income on property taxes as the highest 20 percent, with an average of 3.3 percent paid on their property compared to 1.6 percent.

The Institute on Taxation and Economic Policy says Illinois has one of the most regressive taxes in the nation, largely due to its flat income tax. In its annual “Who pays?” report, the institute said the poorest 20 percent of Illinois households pay 14 percent of their income in taxes because of the flat tax in addition to high sales and property taxes.

Speaking of the Senate, the nonpartisan Institute on Taxation and Economic Policy put out its annual “Who Pays” report on tax equity, which found the vast majority of states have tax systems that are inequitable, with lower- and middle-income families paying a larger percentage of income in taxes than upper-income families.It singled out the “Terrible 10” states with the most regressive tax systems, with the common denominator among those states being that they have no or very low income taxes, which they make up through having very high and broad-based sales taxes.

Look what's happened to an income of $40,000. In 2015, the Institute on Taxation and Economic Policy (ITEP), based in Washington, D.C., looked at incomes in Washington state and found that a salary of $40,000 was still middle class. It was smack-dab in the middle of middle-earning incomes in the state. In 2018, ITEP looked again. This time, $40,000 had slipped a notch, to the second-lowest 20 percent of earners. The reason: More people in the state were making higher-end incomes.

In 2016, an Olympia household earning $25,000 a year paid about 13 percent of its income in state and local taxes, while a household earning $250,000 paid less than 4 percent, according to the resolution. A report this month from the Institute on Taxation and Economic Policy said Washington has the most regressive tax structure in the country, thanks to its lack of a personal income tax and comparatively high sales taxes.

Taxes are the main way communities pay for the things we do together. Taxes pay for essential programs and infrastructure we take for granted, like fire protection, public education, and health inspectors; roads, bridges, and public transit; and the support for people facing hard times. Examining how much people at different income levels pay in taxes is important when considering the fairness of tax policy.

TERRE HAUTE -- Low-earning residents of Indiana and Illinois pay a greater share of state and local taxes than those in all other Midwestern states, and those in most states nationally, according to a new study by a non-partisan think tank.

The study finds that those in the bottom fifth of the income spectrum in Hawaii pay 15 percent of their income in state and local taxes, while those in the top 1 percent pay only 8.9 percent, “which exacerbates inequality in our state,” according to a press release about the study.

Guess what? Washington state’s taxation system continues to be one of the most regressive in the country. This news comes from the Institute on Taxation and Economic Policy (ITEP), which did a deep dive into the taxation policies of all 50 states.

A modestly progressive income tax slightly offsets our regressive sales taxes. But Oklahoma lawmakers cut our top income tax rate by nearly 25 percent since 2004, further tipping the scales to the wealthiest households. Then while grappling with massive budget shortfalls caused in part by these tax cuts, lawmakers took aim at measures that primarily benefit low- and middle-income working families by making the state Earned Income Tax Credit non-refundable and freezing the state standard deduction, while leaving cuts to the top income tax rate in place.

Low-income residents in Hawaii are paying a higher share of their income in taxes than higher level earners. That is the conclusion of a recent report from the Institute on Taxation and Economic Policy titled Who Pays? The Hawaii tax system is considered highly regressive, due to heavy reliance on the General Excise Tax, or GET. This is despite a progressive, graded state income tax and the lowest property taxes in the nation.

The Commonwealth once again claims its spot in the “Terrible 10” most unfair tax structures in the nation. The lowest 20% of income earners in the state pays more than double (2.3 times) their share of family income on state and local taxes than the top 1%.

A new report out from the Institute on Taxation and Economic Policy (ITEP) provides the vital statistics for each state’s tax system. It lays out, in clear and compelling numbers, the sobering message that Hawaiʻi taxes—and those in the United States on average—increase inequality between rich and poor.

Florida’s unfair tax system, which forces low-income residents to contribute the most as a share of their household incomes, along with the state’s worst-in-the-nation per-person investment in public services, would be locked in under Amendment 5.

While Oklahoma has a reputation as a low tax state, poor and middle-income Oklahomans are actually paying a greater share of their income in taxes than the national average, while the richest 5 percent of households — with annual incomes of $194,500 or more — pay less.

Carl Davis for the Institute on Taxation and Economic Policy: [ M]any states traditionally considered to be “low-tax states” are actually high-tax for their poorest residents. The “low tax” label is typically assigned to states that either lack a personal income tax or that collect a comparatively low amount of tax revenue overall. But a focus on these measures can cause lawmakers to overlook the fact that state tax systems impact different taxpayers in very different ways, and that low-income taxpayers in particular often do not experience these states as being even remotely “low tax.”

It follows that low- and middle-income Ohioans pay a higher share than the national average, and wealthy Ohioans pay a lower share. To a degree, that is expected in view of the vastly larger incomes of wealthy Ohioans. At the same time, the state would be well served by altering the shares to make the state and local system more fair, to reflect how new income in recent years, even decades, has flowed largely to households at the highest income rungs.

A study by the Institute on Taxation and Economic Policy, a non-partisan think tank, found that a majority of New Jersey taxpayers in every income group will pay less taxes next year than they did in 2017 as a result of last year’s federal tax-code overhaul. The cap is expected to affect those in high-income brackets the most. Thousands of New Jersey homeowners rushed to prepay their 2018 taxes in December to take advantage of bigger deductions on their 2017 returns before the cap took effect.

Despite claims by the architects of North Carolina’s failed tax-cut experiment, policy choices since 2013 have not ensured that middle and low-income taxpayers are paying lower shares of their income in state and local taxes. Instead the richest taxpayers—whose average income is more than $1 million—continue to pay 33 percent less in state and local taxes as a share of their income than taxpayers who have averages incomes annually of $11,000, a threshold that aligns with deep poverty.

Low-income Idahoans were hit hardest by property and sales taxes, ITEP reported. The lowest-earning segment spent 3.3 percent of income on property tax and 6 percent of income on sales and excise taxes (the latter are sometimes known as “sin taxes”).