Flat taxes have some surface appeal but come with significant disadvantages. Critically, a flat tax guarantees that wealthy families’ total state and local tax bill will be a lower share of their income than that paid by families of more modest means.
Carl Davis
Carl Davis is the research director at ITEP, where he has worked since 2008. Carl works on a wide range of issues related to both state and federal tax policy. He has advised policymakers, researchers, and advocates on tax policy issues in nearly every state. Much of his work relates to the link between taxes and economic growth, and the shortcomings of dynamic scoring and supply-side economic theories.
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brief January 17, 2023 The Pitfalls of Flat Income Taxes
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blog October 31, 2022 Tax Foundation’s ‘State Business Tax Climate Index’ Bears Little Connection to Business Reality
The big problem with the Index is that it peddles a solution that not only falls short of the goal of generating business investment, but one that actively harms state lawmakers’ ability to provide the kinds of public goods – like good schools and modern, efficient transportation networks – that businesses need and want.
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report October 13, 2022 The Geographic Distribution of Extreme Wealth in the U.S.
More than one in four dollars of wealth in the U.S. is held by a tiny fraction of households with net worth over $30 million. Nationally, we estimate that wealth over $30 million per household will reach $26 trillion in 2022 with roughly one-fifth of that amount ($4.5 trillion) held by billionaires.
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blog June 10, 2022 Rising Prices: Another Reason to Be Wary of Tax Cutting Right Now
Many state lawmakers see any economic challenge as an excuse to cut taxes and in 2022, some are citing inflation as a reason to do so. All eyes today are… -
blog April 19, 2022 Cannabis Taxes Outraised Alcohol by 20 Percent in States with Legal Sales Last Year
In 2021, the 11 states that allowed legal sales within their borders raised nearly $3 billion in cannabis excise tax revenue, an increase of 33 percent compared to a year earlier. While the tax remains a small part of state budgets, it’s beginning to eclipse other “sin taxes” that states have long had on the books.
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blog March 16, 2022 State Gas Tax Holidays are Nothing to Celebrate
It’s unlikely that state gas tax holidays will meaningfully benefit consumers, and they come with risks for states’ infrastructure quality.
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report November 18, 2021 Analysis of the House of Representatives’ Build Back Better Legislation
If the bill becomes law, in 2022 federal taxes would go up for the average taxpayer among the richest one percent and down for the average taxpayer in other income groups.
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blog November 9, 2021 Paying The Estate Tax Shouldn’t Be Optional for the Super Rich
ProPublica this year released multiple exposés revealing how the nation’s wealthiest individuals and families avoid taxes on an unimaginable scale. Most recently, it uncovered Republican and Democratic elected officials and political… -
blog October 4, 2021 State Income Tax Reform Can Bring Us Closer to Racial Equity
To pave the way for a more racially equitable future, states must move away from poorly designed, regressive policies that solidify the vast inequalities that exist today.
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report October 4, 2021 State Income Taxes and Racial Equity: Narrowing Racial Income and Wealth Gaps with State Personal Income Taxes
10 state personal income tax reforms that offer the most promising routes toward narrowing racial income and wealth gaps through the tax code.
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blog September 28, 2021 Reforming Federal Capital Gains Taxes Would Benefit States, Too
Congress’s action or inaction on federal tax changes under consideration in the Build Back Better plan could have important implications for states on many fronts. One critical area of note is at the foundation of income tax law: setting the definition of income that most states will use in administering their own income taxes.
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blog September 3, 2021 Frequently Asked Questions about Proposals to Repeal the Cap on Federal Tax Deductions for State and Local Taxes (SALT)
Even though Democrats in Congress uniformly opposed the TCJA because its benefits went predominately to the rich, many Democratic lawmakers now want to give a tax cut to the rich by repealing the cap on SALT deductions.
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report August 26, 2021 Options to Reduce the Revenue Loss from Adjusting the SALT Cap
If lawmakers are unwilling to replace the SALT cap with a new limit on tax breaks that raises revenue, then any modification they make to the cap in the current environment will lose revenue and make the federal tax code less progressive. Given this, lawmakers should choose a policy option that loses as little revenue as possible and that does the smallest amount of damage possible to the progressivity of the federal tax code.
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blog May 13, 2021 Attacks on Voting Rights, Secret Tax-Cut Negotiations in Arizona Reflect Broader Trend to Undermine Democracy
The onslaught of news about multiple states introducing or passing legislation to make it harder to vote is a clear signal that our democracy is in crisis. Decades of policymaking and judicial rulings have created a system in which the voices of the wealthy and powerful have more weight, and some lawmakers are determined to further rig the system and keep it that way.
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blog May 12, 2021 Arizonans Voted to Tax the Rich. Now Lawmakers Want to Undo Most of That.
In 2018, Arizona teachers took part in a national wave of teacher walkouts, protesting inadequate education funding and some of the lowest teacher pay in the nation—direct results of the state’s penchant for deep tax cuts and its decision to levy some of the lowest tax rates in the country on high-income families.
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news release April 20, 2021 SALT Cap Repeal Would Exacerbate Racial Inequities
A new ITEP analysis provides critical data for the debate over whether to repeal the $10,000 cap on state and local tax (SALT) deductions. The report finds that repeal of the SALT cap without other reforms would worsen economic disparities and exacerbate racial inequities baked into the federal tax system.
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blog April 20, 2021 SALT Cap Repeal Would Worsen Racial Income and Wealth Divides
A bipartisan group of 32 House lawmakers banded together to form the “SALT Caucus,” demanding elimination of the SALT cap. None of their arguments in favor of repeal change the fact that it would primarily benefit the rich and, according to new research, exacerbate racial income and wealth disparities.
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report April 20, 2021 Not Worth Its SALT: Tax Cut Proposal Overwhelmingly Benefits Wealthy, White Households
A previous ITEP analysis showed the lopsided distribution of SALT cap repeal by income level. The vast majority of families would not benefit financially from repeal and most of the tax cuts would flow to families with incomes above $200,000.
This report builds on that work by using a mix of tax return and survey data within our microsimulation tax model to estimate the distribution of SALT cap repeal across race and ethnicity. It shows that repealing the SALT cap would be the latest in a long string of inequitable policies that have conspired to create the vast racial income and wealth gaps that exist today.
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blog March 31, 2021 A New Look at Taxes and Race at the State and Local Levels
A new ITEP report reveals how different taxes have very different impacts on racial equity and unveils data for two states showcasing the consequences of their contrasting tax policy choices. In short, we find that income taxes can help narrow the racial income and wealth divides while sales taxes generally make those divides worse.
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blog March 25, 2021 Looking at the Tax Code Through A Race Equity Lens Presents a Strong Case for Reforms
An important new book from Professor Dorothy Brown at Emory University offers a timely look at the federal tax code through the lens of racial equity. The Whiteness of Wealth:… -
blog March 15, 2021 State and Local Cannabis Tax Revenue Jumps 58%, Surpassing $3 Billion in 2020
Cannabis taxes are a small part of state and local budgets, clocking in at less than 2 percent of tax revenue in the states with legal adult-use sales. But they’re… -
brief March 5, 2021 How Long Has It Been Since Your State Raised Its Gas Tax?
Many state governments are struggling to repair and expand their transportation infrastructure because they are attempting to cover the rising cost of asphalt, machinery, and other construction materials with fixed-rate gasoline taxes that are rarely increased.
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blog February 24, 2021 Income Tax Discussion Continues in Alaska
Alaska is notoriously reliant on tax and royalty revenue from oil to fund vital public services and institutions, but declining oil prices and production levels have rendered those revenues inadequate to meet the state’s needs. ITEP analysis of potential state income tax options in Alaska shows the potential to raise between $526 million and $696 million per year yet are quite modest compared to personal income tax structures in other states. When measured relative to state residents’ incomes, any of these options would rank among the bottom five lowest state income taxes in the nation.
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report February 24, 2021 Comparing Flat-Rate Income Tax Options for Alaska
Alaska lawmakers are facing an unprecedented fiscal crisis. The state is more dependent than any other on oil tax and royalty revenues but declines in oil prices and production levels have sapped much of the vitality of these revenue sources. One way of diversifying the state’s revenue stream and narrowing the yawning gap between state revenues and expenses would be to reinstitute a statewide personal income tax. Alaska previously levied such a tax until 1980. This report contains ITEP’s analysis of the distributional impact and revenue potential of a variety of flat-rate income tax options for Alaska, based on draft legislation provided by the Legislative Budget and Audit Committee.
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blog February 12, 2021 It’s Been 10,000 Days Since the Federal Government Raised the Gas Tax
10,000 days. More than 27 years. By next Tuesday that’s how long it will have been since the federal government last raised the gas tax. Over that time, vehicle fuel efficiency has improved by 25 percent and construction costs have grown 185 percent. And yet the federal gas tax has remained frozen at 18.3 cents per gallon, with its purchasing power shrinking by the day. The federal government has never gone this long without updating the nation’s gas tax rate.