Our guest author is Carl Davis, Research Director at the Institute on Taxation and Economic Policy. He was the project lead on the newest edition of ITEP’s Who Pays? report, which provides the only comprehensive measure of the progressivity, or regressivity, of state tax systems.
The vast majority of state and local tax systems are regressive, or upside-down, with the wealthy paying a far lower share of their income in taxes than low-and middle-income families. That is the topline finding of the latest edition of our flagship Who Pays? report, which measures the impact that state tax systems are having on families at every income level. Its findings go a long way toward explaining why so many states are failing to raise the amount of revenue needed to provide full and robust support for our public schools.
As we explain in the report, states with more progressive tax systems also raise more revenue on average. States with regressive tax codes, on the other hand, typically raise less. The reason for this is simple. High-income families receive a huge share of overall income, so when states choose to tax that huge amount of income at lower rates than what everyone else pays, they’re inevitably going to struggle to raise adequate revenue overall.