TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, January 30, 2013

A Distributional Analysis of the Tax Systems in All 50 States

The Institute on Taxation & Economic Policy today released Who Pays? A Distributional Analysis of the Tax Systems in All 50 States (4th ed. Jan. 2013):

The 2013 Who Pays: A Distributional Analysis of the Tax Systems in All Fifty States (the fourth edition of the report) assesses the fairness of state and local tax systems. The report measures the state and local taxes paid by different income groups in 2013 (at 2010 income levels including the impact of tax changes enacted through January 2, 2013) as shares of income for every state and the District of Columbia. It discusses state tax policy features and includes detailed state-by-state profiles providing essential baseline data for lawmakers seeking to understand the effect tax reform proposals will have on constituents at all income levels.

The main finding of this report is that virtually every state’s tax system is fundamentally unfair, taking a much greater share of income from middle- and low-income families than from wealthy families. The absence of a graduated personal income tax and the over reliance on consumption taxes exacerbate this problem in many states. ...

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Ten states rank as having the most regressive overall tax systems. In these “Terrible Ten” states, the bottom 20 percent pay up to six times as much of their income in taxes as their wealthy counterparts. 

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OK, on this basis the price of a Big Mac is regressive, so are fees for cable TV, a dozen eggs at the grocery store, and so on. (But interestingly, not so is the cost of a college education, the cost of lunch in public schools, a lot of medical care, and so on.) Should every item in a free person's budget be means-tested/progressively construed. If the issue herein is just redistribution through governmental income taxes, then let's at least not just focus on the "pennies" at the state income tax level. Let's look at the whole "dollar" including the overwhelming effect of a very progressive Federal Income Taxes (and getting more), the deductibility of high progressive (in the "good" states) state income taxes, along with all the state and local means-tested tax credits. On a separate note: Clearly the citizens of FL, TX, TN, and IN are getting something out of their abominably unjust state income tax regimes that those of IL are not getting.

Posted by: MG | Jan 30, 2013 9:02:02 AM