Data released late last week by the Internal Revenue Service (IRS) indicate that 10 states have greater concentrations of reported income among their very wealthiest residents than the country as a whole. Unfortunately, the tax systems in those ten states generally ignore that very important reality. Of those ten states:
• four lack a broad-based personal income tax;
• three either impose a single, flat rate personal income tax or have a rate structure that all but functions in that manner; and
• three use a graduated rate structure, but two have cut income taxes for their most affluent residents substantially over the past two decades and are now struggling to close multi-billion dollar budget gaps.
The failure to use sufficiently progressive personal income taxes — or to levy any personal income tax at all — results in an overall tax system that is unsustainable, inadequate, and unfair over the long-run. Indeed, of these ten states, over half face severe or chronic budget shortfalls. Reforms to improve the personal income tax — or simply to institute one — should be on the agenda in each of these states.