Marketplace: High-income taxpayers help some states stay above water

However, in 22 states, tax revenue actually increased, with revenue in four states — Idaho, Utah, South Dakota and Colorado — up more than 5%. Revenue fell in the remaining states, with seven down more than 10% —Texas, Oregon, Florida, Nevada, North Dakota, Hawaii and Alaska.

This disparity has a lot to do with the mix of jobs and layoffs in a state, said Carl Davis, research director at the Institute on Taxation and Economic Policy.

“So many lower-income people have been laid off,” Davis said. “Higher-income people have been much more likely to keep their jobs.”

But some states are missing out on taxing those income gains at the top to the full extent possible, said Davis at ITEP.

He pointed to Nevada — heavily dependent on tourism dollars — with revenue down about 12%. That state has “no broad-based income tax,” Davis said. “So you’re leaning a lot on sales taxes, regressive taxes in general, and your revenues aren’t going to do quite as well as progressive taxes, at a time like this of soaring income inequality.”

Davis said let’s contrast that with California, “a state that has opted for a more progressive mix, leaning a bit more on the income tax than most states do, with higher top income tax rates on top earners especially. That’s a state faring a whole lot better,” with revenue up around 2% since the pandemic started.

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