Income Taxes
The Pitfalls of Flat Income Taxes
January 17, 2023 • By Carl Davis, Eli Byerly-Duke
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.
ITEP’s Top 5 Charts of 2022
December 19, 2022 • By Jon Whiten
Covering federal, state, and corporate tax work, here are our top 5 charts of 2022. It’s worth noting that the biggest tax news of 2022 – the adoption of a federal 15 percent corporate minimum tax in the Inflation Reduction Act – should make some of these charts look much better after the new law is implemented.
Election Day in the States: Voters Deliver Important Victories for Tax Justice
November 10, 2022 • By Jon Whiten
Voters in Massachusetts and Colorado raised taxes on their wealthiest residents to fund schools, public transportation and school lunches for kids while making their tax codes more equitable. And voters in West Virginia defeated a proposal to deeply cut taxes, mostly for businesses, and drain the coffers of county and local governments.
Massachusetts Voters Score Win for Tax Fairness with ‘Fair Share Amendment’
November 9, 2022 • By Marco Guzman
In a significant victory for tax fairness, Massachusetts voters approved Question 1—commonly known as the Fair Share Amendment—Tuesday night with 52 percent of the vote. The new constitutional amendment creates a 4 percent surcharge on income over $1 million, and the revenue will specifically fund education and transportation projects in the Bay State.
Tax Foundation’s ‘State Business Tax Climate Index’ Bears Little Connection to Business Reality
October 31, 2022 • By Carl Davis, Matthew Gardner
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.
Measures on the November Ballot Could Improve or Worsen State Tax Codes
October 26, 2022 • By Jon Whiten
In a couple of weeks, voters in a handful of states will weigh in on several tax-related ballot measures that could make state tax codes more equitable and raise money for public services, or take states in the opposite direction, making tax systems less fair and draining state coffers of dollars needed to maintain critical […]
Most States Used Surpluses to Reduce Taxes But Not in Sustainable or Progressive Ways
July 22, 2022 • By Kamolika Das
The average person on the street would have no idea that many states experienced unprecedented budget surpluses this year. Iowa, for instance, has the most structurally deficient bridges of any state with nearly 1 in 5 falling apart. The Iowa Board of Regents proposed a 4.25 percent tuition increase for all three state universities and […]
Some Lawmakers Continue to Mythologize Income Tax Elimination Despite Widespread Opposition
April 19, 2022 • By Kamolika Das
One of the most surprising trends this legislative session is that conservative leaders and the business community joined with progressive advocates to oppose income tax repeal plans. There is a general consensus that income tax repeal is a step too far.
Arizona Ruling Preserves High-Income Interests Over Education Investments, Popular Vote
March 17, 2022 • By Marco Guzman
An Arizona court decision delivered an unfortunate blow to voters and those in the state who favor a progressive, adequate tax system that can fund critical priorities including K-12 education.
What We Can Learn Today from the American Rescue Plan – and Sen. Rick Scott’s Proposed Tax Increases
March 11, 2022 • By Steve Wamhoff
The success of the American Rescue Plan Act is worth revisiting today. Instead of pursuing Sen. Rick Scott’s agenda of making life more difficult for those already working the hardest, Congress should extend or make permanent some of the beneficial policies in ARPA.
State-by-State Estimates of Sen. Rick Scott’s “Skin in the Game” Proposal
March 7, 2022 • By Steve Wamhoff
A proposal from Sen. Rick Scott would increase taxes for more than 35% of Americans, with the poorest fifth of Americans paying 34% of the tax increase.
Revenue-Raising Proposals in the Evolving Build Back Better Debate
January 25, 2022 • By Steve Wamhoff
The United States needs to raise more tax revenue to fund investments in the American people. This revenue can be obtained with reforms that would require the richest and wealthiest Americans to pay their fair share to support the society that makes their fortunes possible.
Mississippi Is the Latest in a String of States Pursuing Short-Sighted, Top-Heavy Tax Cuts
January 19, 2022 • By Kamolika Das
Not only is Mississippi's latest tax proposal deeply inequitable, the state simply cannot afford it.
The New Trend: Short-Sighted Tax Cuts for the Rich Will Not Grow State Economies
January 10, 2022 • By Neva Butkus
The same legislators who touted tax cuts for the rich as solution to our problems before the pandemic are also saying tax cuts for the rich are a solution during the pandemic. Tax cuts cannot be a solution to everything, especially at a time when the richest Americans are amassing more wealth than ever.
America’s Richest Would Finally Pay Taxes on Most of Their Income Under Wyden’s Billionaires Income Tax
October 27, 2021 • By Steve Wamhoff
While the Ways and Means bill includes many helpful tax reforms, people like Jeff Bezos and Elon Musk would still pay an effective tax rate of zero percent on most of their income if it was enacted without this change. Sen. Wyden’s proposal would finally end this injustice.
Income Tax Increases in the President’s American Families Plan
May 25, 2021 • By ITEP Staff, Matthew Gardner, Steve Wamhoff
President Biden’s American Families Plan includes revenue-raising proposals that would affect only very high-income taxpayers.[1] The two most prominent of these proposals would restore the top personal income tax rate to 39.6 percent and eliminate tax breaks related to capital gains for millionaires. As this report explains, these proposals would affect less than 1 percent of taxpayers and would be confined almost exclusively to the richest 1 percent of Americans. The plan includes other tax increases that would also target the very well-off and would make our tax system fairer. It would raise additional revenue by more effectively enforcing tax…
Comparing Flat-Rate Income Tax Options for Alaska
February 24, 2021 • By Carl Davis
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…
Voters Have the Chance in 2020 to Increase Tax Equity in Arizona, Illinois, and California, And They Should
October 22, 2020 • By Marco Guzman
There’s a lot at stake in this election cycle: the nation and our economy are reeling from the effects brought on by the coronavirus pandemic and states remain in limbo as they weigh deep budget cuts and rush to address projected revenue shortfalls.
Illinois’s Flat Income Tax Amounts to a Tax Subsidy for the Wealthiest Illinoisans that Compounds Income and Wealth Inequalities
September 17, 2020 • By Lisa Christensen Gee
This November, Illinoisans will decide whether to amend the state constitution to allow a graduated income tax. A “yes” vote on the Illinois Fair Tax constitutional amendment will make effective legislation that will replace the current flat tax rate of 4.95 percent with graduated rates that cut taxes for those with taxable income less than $250,000 and institute higher marginal rates on taxable incomes greater than $250,000.
New 20-Year Study Provides Insight on How State Tax Systems Worsen Inequality and the Racial Wealth Gap
September 17, 2020 • By ITEP Staff, Lisa Christensen Gee
A new study finds that over the last 20 years, Illinois’s tax system has effectively sapped $4 billion more from Black and Hispanic communities than it would have under a graduated income tax while also allowing the state’s highest-income (mostly white) households to pay $27 billion less in taxes, the Institute on Taxation and Economic Policy (ITEP) said today.
Illinois’s Flat Tax Exacerbates Income Inequality and Racial Wealth Gaps
September 17, 2020 • By Lisa Christensen Gee
Flat or graduated personal income taxes have varying effects on the annual individual tax liabilities of taxpayers at different income levels. Less examined is how tax structures affect income inequality and racial wealth gaps. This brief illustrates how Illinois’s historic flat income tax structure compares to the proposed Fair Tax through a multi-year retrospective analysis. It shows that Illinois’s flat income tax in lieu of a graduated rate tax used by most states amounts to a tax subsidy for the wealthiest Illinoisans that compounds income inequality and racial wealth gaps.
What Biden Means By No Tax Increases on Anyone “Making Under $400,000”
May 22, 2020 • By Steve Wamhoff
Presidential candidate Joe Biden said on Friday that under his proposals, no one with income below $400,000 would pay higher taxes than they do now. Does this make sense? It is true that Congress and the next president have many options to raise trillions of dollars from people who have incomes even higher than that. […]
Talking Taxes in Alaska
March 6, 2020 • By Carl Davis
Alaska’s tax system underwent major changes in the 1970s when oil was found at Prudhoe Bay. Lawmakers repealed the state’s personal income tax (making Alaska the only state ever to do so) and began balancing the state’s budget primarily with oil tax and royalty revenue instead. But as oil prices and production levels have declined, a yawning gap has opened between state revenues and the cost of providing vital public services.
State Itemized Deductions: Surveying the Landscape, Exploring Reforms
February 5, 2020 • By Carl Davis
State itemized deductions are generally patterned after federal law, though nearly every state makes significant changes to the menu of deductions available or the extent to which those deductions are allowed. This report summarizes the key details of each state’s itemized deduction policies and discusses various options for reforming those deductions with a focus on lessening their regressive impact and reducing their cost to state budgets.
Maine Reaches Tax Fairness Milestone
September 26, 2019 • By Guest Blogger
Lawmakers in Maine this year took bold steps toward making the state’s tax system fairer. Their actions demonstrate that political will can dramatically alter state tax policy landscape to improve economic well-being for low-income families while also ensuring the wealthy pay a fairer share.
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