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Friday, January 18, 2019

The Richest Pay Half The Effective Tax Rates Of The Poor In State And Local Taxes

Trickle-down economics has trickled down to the states.

Virtually every state in the union takes a greater share of income from working families than the rich, according to a new report from the Institute on Taxation and Economic Policy (ITEP).

The report’s stark conclusion finds that state and local tax rates are “fundamentally unfair,” creating a hindrance to economic growth for the middle class that has been exacerbated by states moving away from progressive income taxes and toward consumption taxes.

“There’s a good chance it’s the so-called ‘takers’ who spend so much on necessities that they pay an effective tax rate of 10 or more percent, due largely to sales and property taxes,” Matthew Gardner, executive director of ITEP and an author of the study, said.

Texas, which is often called the “low tax state,” ranks among the states that have the highest taxes on the poor.

The bottom 20 percent pays 6 times the rate of the richest in Washington State, Florida, South Dakota, Illinois, Texas, Tennessee, Arizona, Pennsylvania, Indiana, and Alabama. ITEP called these states the “Terrible Ten” Most Regressive States.

Deductions and the practice of taxing capital gains at a lower rate make state tax codes more regressive. Policies like the earned income tax credit, which Michigan Republicans just cut, make the code more progressive, but only exist in 24 states and the District of Columbia.

Even where states do have progressive income tax rates, they’re effectively shaped to put the burden on working families. “Alabama is a good example of a state with nominally graduated income tax rates that don’t mean much in practice,” the report states. “The state’s top tax rate of 5 percent is not much lower than Louisiana’s top rate — but the top rate kicks in at just $6,000 of taxable income for married couples. ”

This is the fourth such study from ITEP and it includes a comprehensive study of state and local tax rates (PDF).

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39 responses to “The Richest Pay Half The Effective Tax Rates Of The Poor In State And Local Taxes”

  1. elw says:

    Anyone who does not think our tax system is rigged to help the Rich, is sleeping. It has been so since Reagan was president and has only gotten worse with time. There is nothing fair about how we are taxed. The richer you are the less percentage of your income you pay in taxes; it is the middle class who supports this Country’s economy and the Rich and Powerful have been undermining that for decades. The proof in is the state of the economy today and the continued decline in income and living standards that the Middle Class has suffered. We will never fully recover as a Country until we have a strong and vigorous Middle Class again.

  2. Lynda says:

    What a surprise. The tax rates are set by those of the moneyed class or in their employ. Great system we’ve got her friends. If you’ve got it no worry, if you don’t you most likely never will.

    • lana ward says:

      Those making $30,000 a year will pay more in taxes than those making $500,000 because of the deal O pushed after the fiscal cliff debacle. O said 2% would see a tax hike, instead 77.1% of all tax payers are seeing higher taxes. He lied to us again!! And the dems want to find $1 trillion more in taxes this year!!!

      • Bill says:

        Psycho Ward the only incderease in taxes that the vast majority received was due to the FICA deduction being restored to it original 6.2%. Again you pull something from your alternate reality brain and believe it to be the truth.

  3. charleo1 says:

    We are living in the days of the corporate hegemony. There is actually very little debate on this.
    Even in the Right Wing, that has been the work horse of the monied elite for at least the last
    30 years. But much more so, since the Republican Party’s domination of Congress in ’94.
    The groundwork laid by Congressional Republicans in the go, go nineties, with the repeal
    of Glass-Steagall, and a general deregulation across the board for banks, insurance, and
    investment houses, set up the economy for the inevitable, slow motion train wreck, that began
    in 2007, and tumbled to it’s unprecedented climax in the fall of 2008. Upon inspection, what
    we found was, a corporate playground, where they were allowed to virtually write their own rules.
    What we discovered was, that it was no longer necessary that an investment actually make
    money for the client. The game had been rigged, so Wall Street made more profits by baiting in
    investors, and pension funds, in the front office. While betting aganist it’s own product in
    the back room. But what was even more appalling, was the fact it was all legal. But I think
    the greatest testament to the power, and political clout of the corporation, is that in the months
    after these bankers had laid low our economy, they were still 99% successful in stopping much
    of what Congress was able to pass, to prevent another such occurrence. And as one power
    rises, another falls. In Washington, and State Capitols across the Country, we have millionaire
    politicians talking to the billionaire’s surrogates. Who bring them the laws to pass, already
    written out, chapter and verse. Thou shalt not ever tax the rich man, unless you can repay
    him with cheaper labor. Of course the Country is in debt. When wages don’t meet the costs
    of living. When tens of millions only access to healthcare, is a crowded emergency room.
    While millions of jobs go overseas, Americans are told it is them that ask too much. Give
    too little, and need to live within their means. It is the hay day of arrogance, and hubris.
    Does it really surprise us that much that the tax code favors the rich? They wrote it!

    • jarheadgene says:

      You are SOOOOO Right Charleo1 ! That is exactly why any “THINKING, CARING” voter voted, (not so much for President Obama) against the Greedy, Bully Romney. And now he is the biggest crybaby sore loser, I can remember in a long time. HE (the mormon bishop) reminds me of when Jesus told the Pharisees, how they spoke so much of GOD but their HEARTS were far from HIM.

    • 062014 says:

      Right on! The little guy gets thrown in prison while the wealthy change the laws to accommodate their crimes.

      • RobertCHastings says:

        Exactly what is going on with our banking and financial systems. Not a single upper-level executive from the big banks or mortgage lenders or financial institution has been put in prison for his part in the 2007 financial collapse of the US, yet. While the Obama DOJ is STILL working on investigations, they have been unable to prosecute anyone, because, as charleo1 demonstrates, everything works for those who know how to game the system, not those who work within the system. I still haven’t figured out how the CEOs of BofA and other big banks STILL got millions in bonuses even though their banks tanked. All the boards seem to be able to say is that they couldn’t keep the best of the best if they couldn’t dish out the big bonuses. Hell, the companies wouldn’t have tanked if you had someone competent in there to start with!

  4. This does not surprise me. I believe it is also important to note the impact State, sales, real estate, and the entire assortment of State related taxes have on the middle class and the poor. The taxes a millionaire pays decorting their yacht in Italy, going on a weekend shopping spree in France, skiing in the Alps, or vacationing in Bali is, literally, insignificant. The impact of high State taxes on a waitress, a carpenter or a plumber can be the difference between eating a burger and paying the electric bill.

  5. Eleanore Whitaker says:

    Most Americans are more than ready to put an end to huge helpings of tax cuts that made that 40% wealth among the top 1%. What we really need to do is to stop handing out tax revenues in the form of tax subsidies to any business that reports profits for more than 5 years. It’s insane to hand Big Oil $12 billion and then when a natural disaster strikes, claim there’s no money to pay for disaster relief. All that shows is a total misguided idea of what our tax dollars are really for.

  6. L. Roy says:

    The biggest irony here is how poorly the poor fare in these states and how supposedly “well-run” these states are supposed to be.

  7. montanabill says:

    Thank the lottery. What services do the high earners in these states get above anyone else that warrants them having to pay more in taxes?

    • awakenaustin says:

      Really? You believe it is the lottery in Texas and not the sales tax that causes this tax structure. Do you just pick some random thing you don’t like and throw it into the discussion and offer it as the source of all that is wrong.
      You are right there is absolutely no advantage to being wealthy. Being wealthy is just a sacrifice that some people have to make for the good of the rest of society. It is a crappy task, but someone has to do it. I sympathize with you man. How can you stand it?
      Services – you know Austin having been here. East of IH 35 (you know what that means) there are 7 Fire Stations. West of IH 35 there are 20+ Fire Stations. I am sure that is just an accident though and has nothing to do with the expensive houses in Rollingwood, Westlake, Travis Country, Circle C, Barton Creek, Lost Creek and so on. Of course, Austin has a lot of wealthy people and coincidently the overwhelming majority of them live west of IH35. When the government has to build something which no one wants in their neighborhood, I bet you can guess which neighborhood it gets built in.
      I will tell you what the poor don’t get in Texas for their money. They don’t get good public schools, good health care, good public libraries, lots of nice green parks with facilities and playscapes, nice municipal pools, efficient and effective public transportation. All of the existing and potential government services which would be of the most help to the poor are the most poorly funded and the first to go when someone needs to trim the budget. They get Local and State Governments which by and large ignore them and their needs and concerns while those governments pay a great deal of attention and cater to the needs and interests of their better off citizens. The wealthy get access to government and its ability to do things which the poor do not get. The wealthy get considreation for their sensibilites.
      You know, it is one thing to think or opine that the poor are completely responsible for their own situations, but there is a whole new level of wilful blindness involved in pretending that the wealthy don’t get any more from government than anyone else and that no advantage vis a vis the governemnt accrues out of the very fact of being wealthy.

      • montanabill says:

        Lottery is about the only think I could think of that the rich usually don’t participate in. Think about sales tax. A lower income person may spend 60% of their income on taxable items. So someone making $50,000 will pay sales tax on $30,000 of purchases. I think that is being generous. A high earner will buy a car that costs more than $50,000. I think you will find sales tax is a progressive tax.

        The situation in Austin is exactly opposite of what happens in my town. Poor neighborhoods get the parks, new public schools and library extensions.

        You are right that the well off get access to government. That hasn’t changed since the first type of governments were invented. I have easy access to my congressman. But, I don’t ever try to influence him in any way. I trust his judgement. If I find I can’t trust his judgement, I’ll support someone else. And it is not like he doesn’t vote for stuff I don’t like.

        However, as I said before, I have walked in everyone’s shoes. The first third of my life, I was poorer than the poor today. The middle third, I was lower middle class to middle, middle class. The last third of my life, I have been upper middle class, to rich, to very rich. If you haven’t walked the walk, you are simply conjecturing what the rest is like.

        • Bill says:

          How is a tax that is the same rate for all taxpayers considered progressive. If I buy a $50,00 car and a millionaire buys the same car we pay the same sales tax. Federal Income tax rates are progressive, the marginal rate increase as income increases.

          • montanabill says:

            That’s right. Why should anyone pay any difference for the same car? It is far more likely the millionaire will buy a car costing twice as much, incurring twice the sales tax. Why should people who are more creative or who work harder to make a better income be punished by a higher tax rate? They even get fewer deductions than you for the same deductible items because of the percentages of AGI that they must meet. Do they get any more government services than you do?

        • awakenaustin says:

          Oh come on. You don’t try to influence your Congressman to do what is right? You don’t call problems you are aware of to his attention? You don’t tell him what you think about things? What your opinion is? What do you talk about- what the wives have been doing and how the kids are?
          The Lottery would be an additional way of taxing the poor then wouldn’t it.
          Because sales taxes are flat taxes they are regressive. It is not an issue of opinion it is a fact. Regressive taxes impose a greater burden on those with lower incomes. That is a fact also borne out by every study ever conducted of taxing scenarios. No one says otherwise. It is not an accident that Texas and many other States fund their state governments primarily with sales taxes.

          • montanabill says:

            I know the man. He will do what is right, even if it means voting against his party. I may not agree with his decisions from time to time, but when asked for an explanation, he will give it straight without puffery or sugar coating.

            The lottery IS an additional way of taxing the poor and mostly the poor.

            Sales taxes are not regressive. Items that cost more, have a higher tax amount. It is, however, a much fairer tax than income tax. In most states, food and medical are exempt from sales tax. For other items, the rich pay a much larger amount than the poor, but everyone contributes. Whereas with income tax, far too many, have no skin in the game, so to speak, content to let others pay for the operation of the country while still maintaining their say (votes).

          • awakenaustin says:

            Sales tases are regressive.

          • awakenaustin says:

            Sorry. Sales taxes are regressive. Minor research will give you that answer. We have been through this before. If you live in this nation and are old enough to be responsible for and to pay money for things or own things or work at any level of income – you pay taxes. I don’t like paying taxes anymore than anyone else, unfortunately they are the price of civilization. I do like roads. I like air and water which are relatively clean and safe to consume. Clean food and reasonably safe drugs are nice also. Having served in it I think a standing Army is a good idea. Although they don’t always get there in time to prevent the problem, I like the idea of being able to call the police and fire departments. I think a good secular public education system has no down side. In fact, if more people had a good education and a meaningful job there would be fewer people interested in stealing my TV. (Single most common thing shared by all prison inmates – lack of a high school diploma. In Texas anyway.) I don’t have any opposition to spending money efficiently and effectively. I just don’t believe in throwing the baby out with the bath water.
            Your discussion of your rep reminds me of the drop dead gorgeous woman who acts as if all the attention she gets from everyone is because of her sense of humor. How many people where you live actually “know” the rep? How many people get to ask for explanations from him as to why he does things? But maybe the bigger point, because your rep is somehow above the fray and conflict and the interplay of influence from whatever sources, do you suppose that everyone is? It has been my experience that rational people don’t spend money irrationally. There must be some reason PACs, Lobbies and campaign contributions exist.
            Let me know please, why if being poor and not paying taxes is such a great gig, more rich folks aren’t dropping out and becoming poor. Why are they fighting so hard to keep every cent they possibly can? Wait, I’ll answere the question. Because no matter what the circumstances it is better to be rich than poor. Hell, it’s better to be moderately well off than moderately poor.

          • montanabill says:

            Nobody is objecting to paying taxes. Our discussion over tax fairness. I have a problem with graduated taxes. The idea that one group of people are required to pay a larger percentage of their incomes than another group. All of the things you mentioned are not just in place to serve the people paying the most taxes, they are to serve all the people. It is only human nature that if one group is paying more than another, they will expect more for that money. If I buy a $100,000 car, I’m expecting more car than if I bought a $50,000 car. When 1/2 of our people are not contributors but takers, this nation cannot long exist.

            I have three problems with our educational system: 1) a fairly large cultural segment that does not place a value on it, 2) teacher unions and 3) the imposition of political beliefs in the classroom. On the latter, never once during my nearly 20 years of schooling was I subjected to a political view in a classroom nor were politics prevalent on campuses. That changed about the mid-60’s.

            And, yes, I fully understand that having money is better than not having money. I lived it. I didn’t like not having money. I did something about it.

    • johninPCFL says:

      Arguably, they should value the services provided by the local community, as they have more to lose if those services degrade or disappear. While we all appreciate police presence, without it we’d get along. The wealthy would then be forced to hire their own protection detail. Is it worth a bit more in taxes to them if they don’t have to?

      Similarly, I’ve travelled around the world a bit and choose to live here. Citizenship with all its benefits is worth the costs (taxes) that I pay. The wealthy could conceivably live anywhere in the world, but choose here. Even with the graduated tax system in place, it must be worth it to them. In the 1940s the top tax rate was 92%, yet the Carnegies, Vanderbilts, Fords, DuPonts, etc. chose to live here. In the 1950s the top tax rate was 80%, yet the Pickens’, Hughes’, Meyer’s, Rockefellers, etc. chose to live here.

      • montanabill says:

        Your explanation does nothing to tell me why one class of people should pay more than others for public services.

        The Carnegies, Vanderbilts, Fords. built their fortunes long before the 1940’s. In fact, some before income taxes. There is also a big difference between the top tax bracket and the ‘effective’ tax rate. When the top rate was 92%, there were lots of pretty good deductions. Basically, nobody paid anywhere close to 90%.

        In 1946, the highest-bracket rate was cut to 86.45% from 94%—and tax receipts were 17.7% of GDP. In 1952, the highest rate was back at 92%, and tax receipts were 19% of GDP. In 1962, the top rate was 91% and receipts were 17.6% of GDP. Two years later, the rate was cut again to 77%—and receipts were 17.6% of GDP. Identical.

        A fantasy about the 1950s is that government soaked the rich. The real effective tax rate for millionaires was 49% in 1953. The effective rate dropped throughout the decade, reaching 31% by 1960. Joseph Thorndike and Martin Sullivan in Tax Notes magazine took a look at the tax distribution of the decade. They found that those earning more than $100,000 paid less than 5% of the taxes collected in the U.S., a far smaller share than the wealthiest shoulder today. In the 1950’s, the U.S. was a flourishing economy compared to the rest of the world, so naturally, the producers elected to live here.

        If the U.S. becomes like another European state, will it still be advantageous to live here?

        • johninPCFL says:

          Fees paid for services are an exchange of money for labor. If the service is of more importance to a group, it carries a higher value to that group, and is expected to have a higher cost. That cost for public services is taxes.

          ‘Nobody’ is a very broad term. The 92% tax rate would not have been established had nobody paid it. Witness that we have no specific tax bracket labelled ‘over $1T’.

          ‘Advantageous’ is also a very broad term. Is it advantageous to live in a country where nightly armed mobs don’t exist , but tax rates are 40%? Is it advantageous to live in a country where disagreements can be dealt with in court instead of in the street with handguns (though not in Arizona)? I’d stay; Rush Limbaugh threatens to leave. Maybe he’s a good shot.

          • montanabill says:

            Using your logic, if I pay higher local taxes, then I should expect that police would prioritize my call over a lower paying taxpayer. I would get first preference from the fire department. My garbage would be picked up first. But that’s not the way it works, is it?

            Another fallacy. Our highest income tax bracket last year was 35%. No one paid 35%. I’ll leave finding out why as an exercise for you.

            Are you implying that nightly armed mobs don’t exist in the U.S.? Are you implying that only in Arizona are street disagreements handled with handguns? Maybe you need to travel the U.S. a little more, maybe even a little more of FL.

          • johninPCFL says:

            Around here, those living in gated communities DO get preferential trash pickups, DO get more police surveillance, DO get new firehouses located closer. They also pay higher property taxes. Maybe it’s just coincidence.

            If they’re already not paying 35%, why was all the fuss made about 39.6%? Using your logic, they wouldn’t be paying that either, so why not just be quiet and let the ‘bad guys’ think they’d won a huge victory?

            Yes, I’m saying Egypt-style armed mobs don’t roam the streets of major American cities. I’m saying that Arizona presents itself as a ‘wild-west’ area, that it’s more likely that guns would be used settling disputes, as it was in the 1800s. Was ‘Tombstone’ a name drawn from a hat? Wyoming does sport more guns per person, but they present themselves as more civilized.

          • montanabill says:

            I don’t live in any gated communities, but in my towns, trash pickup is scheduled for specific days, gated or not. Gated areas typically have their own surveillance and require less police patrol. I have not seen any preference given by the location of firehouses. It is true that property taxes are tied to assessed value and that more expensive homes pay much higher taxes. Because they are newer neighborhoods, they usually have equally newer schools. However, ad valorem taxes are, by nature, unfair. They are simply another way to extort more money from people who have money without providing any difference in services.

            No one will be paying 39.6% either. But we will be paying about 4% more on Federal Income tax, plus more for Medicare. By the time I add up all the taxes I pay, it is about 50%. Some states have their taxes tied to the amount of federal taxes, so for those states, personal taxes on the achievers will rise, as well.

            Are you then saying that from time to time Egypt style mobs don’t roam the streets of major American cities? I’m afraid you made a bad guess about how Tombstone got it’s name. At this point in time, Arizona is much more dangerous place than Wyoming. I have relatives that live near the border. Just hiking in the desert and running across human traffickers or drug runners can get you shot at.

          • johninPCFL says:

            Days are set, times are not. In my neighborhood, trash pickups often start at 6AM. In the gated communities abutting, not before 9AM. The sheriff’s cruisers go through often, so I don’t believe they have their own security forces. They do have a gate watcher 24/7.

            ‘from time to time’ is better than every night, and one reason why I am happy to pay taxes and live here.

          • montanabill says:

            I would suspect that if you were to check with your waste pick-up people, it is they who create the routes and decide when and where to start each route.

  8. ObozoMustGo says:


    Father, must I go to work?
    No my lucky son.
    We’re living on Easy Street
    On dough from Washington

    We’ve left it up to Uncle Sam,
    So don’t get exercised.
    Nobody has to give a dam –
    We’ve all been subsidized.

    But if Sam treats us all so well
    And feeds us milk and honey,
    Please, daddy, tell me what the hell
    He’s going to use for money.

    Don’t worry, bub, there’s not a hitch
    In this here noble plan –
    He simply soaks the filthy rich
    And helps the common man.

    But, father, won’t there come a time
    When they run out of cash
    And we have left them not a dime
    When things will go to smash?

    My faith in you in shrinking, son,
    You nosey little brat;
    You do too damn much thinking, son,
    To be a DemocRAT!

    Rep. Clarence J. Brown, (R-Ohio) poem placed in Congressional Record, 1949

    Have a nice day!

    “A government which robs Peter to pay Paul can always depend on the support of Paul.” — George Bernard Shaw

  9. highpckts says:

    I seems to me that another example is the states doing away with income tax and relying on sales tax for revenue.

  10. Andrew says:

    There are a few simple explanations of this which all can be put under one heading: the GOP’s Reverse Robin Hood fiscal policies…have you noticed that a few Red states have foisted a plan where income taxes would be abolished and sales taxes would be implemented or raised? Income taxes are progressive….sales (or flat) taxes are regressive, meaning that the poorer you are, the more in percentage of taxes you pay. Believe it or not, the GOP are getting this raised sales taxes/flat taxes idea from its Libertarian wing. The simple fact of the matter is that the Republican Party’s mantra still is, “screw the poor and middle class…the rich need to get richer”. Even though the wealthy and big corporations are NOT the “Job Creators” (the middle class having money in their pockets truly creates demand, which creates jobs), the GOP will claim, to their dying days, that they are.
    On New Year’s Day, I posted the truth on 3 GOP Facebook pages and the admins (administrators) pulled the Bush-League maneuver of reporting the truth as “spam”, allowing FB’s computer system to kick in and block me from commenting or posting on most FB pages, including those of the GOP. Putting aside the painful fact that Mark Zuckerberg needs to create more jobs by having live people investigate “spam” reports on his social media platform rather than having a computer system do it, the reason I post the truth on GOP pages is not to try and do the impossible, which is to convince the Conservative (Con) and Tea Party Militia (Bagger) wings that they’re wrong…my audience for those posts are the GOP moderates, who are severely underrepresented in the party. Before the elections back in November, I heard from several sources that as many as 30 million GOP moderates were going to leave the party by voting for Democrats. That didn’t happen as, if they had done that, the GOP’s pathetic gerrymandering of US House and state legislative districts would have failed miserably. GOP moderates blew a golden opportunity to send a message to the Cons and Baggers: “start your own parties and leave us alone”. Today’s Democrats are actually the GOP moderates, as evidenced by quote from Bill Maher on his HBO show, “Real Time”, back in December 2011: “The Democratic Party has moved to the right and the Republican Party has moved right into the insane asylum”. The continuation of the GOP’s Reverse Robin Hood fiscal policies now and for the next two years is completely the fault of GOP moderates still voting for the Cons and Baggers…look at what you hath wrought, GOP moderates…we will all now suffer because of it 🙁 ssmdh

  11. bcarreiro says:


  12. William says:

    Nothing new here, that’s what happens when the GOP makes the rules, will the working people ever wake up?

  13. Wyoming is doing the same thing raising taxes on the poor. Taking away our vote electing Cindy Hill for public instructor of the schools. I think the WY people are opposing the legislators.

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