State governments provide a wide array of tax breaks for their elderly residents. Almost every state that levies an income tax allows some form of income tax exemption or credit for citizens over age 65 that is unavailable to non-elderly taxpayers. Most states also provide special property tax breaks to the elderly. Unfortunately, too many of these breaks are poorly-targeted, unsustainable, and unfair. This policy brief surveys federal and state approaches to reducing taxes for older adults and suggests options for designing less costly and better targeted tax breaks.
Meg Wiehe
Meg Wiehe is ITEP’s deputy executive director. She joined ITEP in 2010 after spending several years working on tax policy in her home state of North Carolina. She coordinates ITEP’s federal and state tax policy research and advocacy agenda. Meg works closely with policymakers, legislative staff and state and national organizations to provide guidance and research on policy solutions that will achieve equitable and sustainable federal, state and local tax systems.
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brief November 28, 2016 State Tax Preferences for Elderly Taxpayers
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report September 15, 2016 State Tax Codes as Poverty Fighting Tools
Despite this unlevel playing field states create for their poorest residents through existing policies, many state policymakers have proposed (and in some cases enacted) tax increases on the poor under the guise of “tax reform,” often to finance tax cuts for their wealthiest residents and profitable corporations.
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brief September 14, 2016 Property Tax Circuit Breakers
State lawmakers seeking to make residential property taxes more affordable have two broad options: across-the-board tax cuts for taxpayers at all income levels, such as a homestead exemption or a tax cap, and targeted tax breaks that are given only to particular groups of low- and middle-income taxpayers. One such targeted program to reduce property taxes is called a “circuit breaker” because it protects taxpayers from a property tax “overload” just like an electric circuit breaker: when a property tax bill exceeds a certain percentage of a taxpayer’s income, the circuit breaker reduces property taxes in excess of this “overload” level. This policy brief surveys the advantages and disadvantages of the circuit breaker approach to reducing property taxes.
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brief September 14, 2016 Reducing the Cost of Child Care Through State Tax Codes
Low- and middle-income working parents spend a significant portion of their income on child care. As the number of parents working outside of the home continues to rise, child care expenses have become an unavoidable and increasingly unaffordable expense. This policy brief examines state tax policy tools that can be used to make child care more affordable: a dependent care tax credit modeled after the federal program and a deduction for child care expenses.
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brief September 14, 2016 Rewarding Work Through State Earned Income Tax Credits
The Earned Income Tax Credit (EITC) is a policy designed to bolster the earnings of low-wage workers and offset some of the taxes they pay, providing the opportunity for struggling families to step up and out of poverty toward meaningful economic security. The federal EITC has kept millions of Americans out of poverty since its enactment in the mid-1970s. Over the past several decades, the effectiveness of the EITC has been magnified as many states have enacted and later expanded their own credits.
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brief August 17, 2016 The Folly of State Capital Gains Tax Cuts
Read the brief in a PDF here. The federal tax system treats income from capital gains more favorably than income from work. A number of state tax systems do as… -
brief July 11, 2016 Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
This brief was updated July 2018 Read this Policy Brief in PDF here. Sales taxes are an important revenue source, composing close to half of all state tax revenues.[1] But… -
brief June 2, 2016 State Treatment of Itemized Deductions
Read this Policy Brief in PDF Form Map of State Treatment of Itemized Deductions Thirty-one states and the District of Columbia allow a group of income tax breaks known as… -
report February 24, 2016 Undocumented Immigrants’ State & Local Tax Contributions (2016)
This report was updated in March 2017 Read as a PDF. (Includes Full Appendix of State-by-State Data) Report Landing Page Public debates over federal immigration reform often suffer from insufficient… -
brief February 11, 2016 Rewarding Work Through State Earned Income Tax Credits
See the 2016 Updated Brief Here Read the brief in a PDF here. that time, the EITC has been improved to lift and keep more working families out of poverty.… -
report September 17, 2015 State Tax Codes As Poverty Fighting Tools
The U.S. Census Bureau released data in September showing that the share of Americans living in poverty remains high. In 2014, the national poverty rate was 14.8 percent – statistically unchanged from the previous year. However, the poverty rate remains 2.3 percentage points higher than it was in 2007, before the Great Recession, indicating that recent economic gains have not yet reached all households and that there is much room for improvement. The 2014 measure translates to more than 46.7 million – more than 1 in 7 – Americans living in poverty. Most state poverty rates also held steady between 2013 and 2014 though twelve states experienced a decline.
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brief September 17, 2015 Rewarding Work Through State Earned Income Tax Credits
Despite some economic gains in recent years, the number of Americans living in poverty has held steady over the past four years. At the same time, wages for working families have remained stagnant and more than half of the jobs created by the economic recovery since 2010 were low-paying, mostly in the food services, retail, and employment services industries. Our country’s growing class of low-wage workers often faces a dual challenge as they struggle to make ends meet. First, wages are too low and growing too slowly – despite recent productivity gains – to keep up with the rising cost of food, housing, child care, and other household expenses. At the same time, the poor are often saddled with highly regressive state and local taxes, making it even harder for low-wage workers to move out of poverty and achieve meaningful economic security. The Earned Income Tax Credit (EITC) is designed to help low-wage workers meet both those challenges.
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report September 17, 2015 Low Tax for Whom?: Tennessee is a “Low Tax State” Overall, But Not for Families Living in Poverty
Annual data from the U.S. Census Bureau appear to lend support to Tennessee’s reputation as a “low tax state,” ranking it 50th nationally in taxes collected as a share of personal income.1 But focusing on the state’s overall tax revenues has led many observers to overlook the fact that different taxpayers experience Tennessee’s tax system very differently. In particular, the poorest 20 percent of Tennessee residents pay significantly more of their income (10.9 percent) in state and local taxes than any other group in the state. For low-income families, Tennessee is far from being a low tax state.2 In fact, only thirteen states tax their poorest residents more heavily than Tennessee.
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report September 17, 2015 Low Tax for Whom?: South Dakota is a “Low Tax State” Overall, But Not for Families Living in Poverty
Annual data from the U.S. Census Bureau appear to lend support to South Dakota’s reputation as a “low tax state,” ranking it 51st nationally in taxes collected as a share of personal income, the lowest overall tax state.1 But focusing on the state’s overall tax revenues has led many observers to overlook the fact that different taxpayers experience South Dakota’s tax system very differently. In particular, the poorest 20 percent of South Dakota residents pay significantly more of their income (11.3 percent) in state and local taxes than any other group in the state. For low-income families, South Dakota is far from being a low tax state.2 In fact, only eleven states tax their poorest residents more heavily than South Dakota.
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report September 17, 2015 Low Tax for Whom?: Washington is a “Low Tax State” Overall, But Not for Families Living in Poverty
Annual data from the U.S. Census Bureau appear to lend support to Washington’s reputation as a “low tax state,” ranking it 36th nationally in taxes collected as a share of personal income.1 But focusing on the state’s overall tax revenues has led many observers to overlook the fact that different taxpayers experience Washington’s tax system very differently. In particular, the poorest 20 percent of Washington residents pay significantly more of their income (16.8 percent) in state and local taxes than any other group in the state. For low-income families, Washington is far from being a low tax state.2 In fact, Washington is the highest tax state in the country for poor people.
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report September 17, 2015 Low Tax for Whom?: Florida is a “Low Tax State” Overall, But Not for Families Living in Poverty
Annual data from the U.S. Census Bureau appear to lend support to Florida’s reputation as a “low tax state,” ranking it 48th nationally in taxes collected as a share of personal income.1 But focusing on the state’s overall tax revenues has led many observers to overlook the fact that different taxpayers experience Florida’s tax system very differently. In particular, the poorest 20 percent of Florida residents pay significantly more of their income (12.9 percent) in state and local taxes than any other group in the state. For low-income families, Florida is far from being a low tax state.2 In fact, only three states tax their poorest residents more heavily than Florida.
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report September 17, 2015 Low Tax for Whom?: Texas is a “Low Tax State” Overall, But Not for Families Living in Poverty
Annual data from the U.S. Census Bureau appear to lend support to Texas’ reputation as a “low tax state,” ranking it 39th nationally in taxes collected as a share of personal income.1 But focusing on the state’s overall tax revenues has led many observers to overlook the fact that different taxpayers experience Texas’ tax system very differently. In particular, the poorest 20 percent of Texans pay significantly more of their income (12.5 percent) in state and local taxes than any other group in the state. 2 For low-income families, Texas is far from being a low tax state. In fact, only six states tax their poorest residents more heavily than Texas.
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report September 17, 2015 Low Tax for Whom?: Arizona is a “Low Tax State” Overall, But Not for Families Living in Poverty
Annual data from the U.S. Census Bureau appears to lend support to Arizona’s reputation as a “low tax state,” ranking it 37th nationally in taxes collected as a share of personal income.1 But focusing on the state’s overall tax revenues has led many observers to overlook the fact that different taxpayers experience Arizona’s tax system very differently. In particular, the poorest 20 percent of Arizona residents pay significantly more of their income (12.5 percent) in state and local taxes than any other group in the state.2 For low-income families, Arizona is far from being a low tax state. In fact, only four states tax their poorest residents more heavily than Arizona.
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report April 15, 2015 Undocumented Immigrants’ State & Local Tax Contributions (2015)
This report was updated February 2016 Read as a PDF. (Includes Full Appendix of State-by-State Data) Report Landing Page In the public debates over federal immigration reform, sufficient and accurate information… -
brief March 23, 2015 State Tax Preferences for Elderly Taxpayers
State governments provide a wide array of tax breaks for their elderly residents. Almost every state that levies an income tax now allows some form of income tax exemption or credit for citizens over age 65 that is unavailable to non-elderly taxpayers. And most states provide special property tax breaks to the elderly. Unfortunately, too many of these breaks are poorly-targeted, unsustainable, and unfair. This policy brief surveys federal and state approaches to reducing taxes for older adults and suggests options for designing less costly and better targeted tax breaks for elderly taxpayers.
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report January 30, 2015 Who Pays? (Fourth Edition)
Major tax overhauls are on the agenda in a record number of states, and “Who Pays?” documents in state-by-state detail the precise distribution of state income taxes, sales and excise… -
report September 18, 2014 State Tax Codes As Poverty Fighting Tools
Read the Report in PDF Form The Census Bureau released data in September showing that the share of Americans living in poverty remains high. In 2013, the national poverty rate… -
report August 5, 2014 Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
Sales taxes are an important revenue source, comprising close to half of all state revenues in 2013. But sales taxes are also inherently regressive because the lower a family’s income, the more of its income the family must spend on things subject to the tax.
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brief July 30, 2014 Options for Progressive Sales Tax Relief
See the 2016 Updated Brief Here Read the Policy Brief in PDF Form Sales taxes are one of the most important revenue sources for state and local governments—and are also… -
report July 21, 2014 State Estate and Inheritance Taxes
For much of the last century, estate and inheritance taxes have played an important role in helping states to adequately fund public services in a way that improves the progressivity of state tax systems. While many of the taxes levied by state and local governments fall most heavily on low-income families, only the very wealthy pay estate and inheritance taxes.
Recent changes in the federal estate tax, however, culminating in the “fiscal cliff ” deal of early 2013, have forced states to reevaluate the structure of their estate and inheritance taxes. Unfortunately, the trend of late has tended toward weakening or completely eliminating state estate taxes. This policy brief discusses inheritance and estate taxes and how states can adopt these important components of a progressive tax structure.