State Tax Systems Hurt Poor, Study Finds
State sales, tobacco, and gasoline taxes consume 5.4 percent of the incomes of the nation's lowest-earning families, but 2.5 percent or less of the incomes of those earning more than $66,000 annually, a new study reports.
The study, a joint effort of the Institute on Taxation and Economic Policy and Citizens for Tax Justice, a watchdog organization, argues that only by increasing their reliance on taxes based on income--primarily personal and corporate--can states make their tax structures more progressive.
Currently, according to the organizations, the average statutory state and local sales-tax rate is 5.6 percent. If states attempted to broaden the base of goods and services taxed--as Florida and others have considered--the average rate required to achieve comparable revenue would fall to 3.5 percent, their report says. But that form of broadened taxation would continue to have the greatest effect on those with the least income, it argues.
The groups contend that some form of progressive tax-rebate scheme, combined with greater reliance on corporate and income taxation, offers the best hope of distributing tax burdens more fairly.
Copies of the report, which includes state-by-state listings of tax rates and characteristics, are available for $20 from Citizens for Tax Justice, 1311 L St., N.W., Washington, D.C. 20005.