WASHINGTON – State tax systems across the United States, including Rhode Island, take a larger share of income from middle- and low-income families than from wealthy families, according to a new report by the Institute on Taxation and Economic Policy.
The report, “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States,” was released Wednesday and measured the state and local taxes paid by different income groups in 2013 as shares of income for every state and the District of Columbia. The report used 2010 income levels and included the impact of tax changes enacted through Jan. 2, 2013.
Who Pays? named Rhode Island as one of the 10 most regressive states with the highest taxes on the poor: the “terrible 10.” The other nine states were: Arizona, Arkansas, Florida, Hawaii, Illinois, Indiana, Pennsylvania, Texas and Washington.
Combining all of the state and local income, property, sales and excise taxes Rhode Islanders pay, the lowest 20 percent of the population paid 12.1 percent of their family income in taxes, the second 20 percent paid 10.1 percent of their family income and the middle 20 percent paid 10.5 percent of their family income.
The fourth 20 percent paid 9.5 percent of their family income in taxes, while the next 15 percent after that paid 8.7 percent, the next 4 percent paid 8.6 percent of their income and the top 1 percent of Rhode Islanders paid 6.4 percent of their income in state and local taxes.
According to the report, the national average is 11.1 percent of family income for the bottom 20 percent of the population, 9.4 percent of family income for the middle 20 percent and 5.6 percent of family income for the top 1 percent of the population.
“We know that governors nationwide are promising to cut or eliminate taxes, but the question is who’s going to pay for it,” Matthew Garner, executive director of ITEP and author of the study, said in a statement. “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.
“In too many states, these are the people being asked to make up the revenues lost to income tax cuts that overwhelmingly benefit the wealthiest taxpayers,” said Garner, adding that state consumption tax structures are “particularly regressive” with an average 7 percent rate for the poor, 4.6 percent rate for the middle incomes and a 0.9 percent rate for the wealthiest taxpayers.
To view the full report, visit: www.whopays.org. The Institute on Taxation and Economic Policy is a 501(c)(3) nonprofit, non-partisan research organization whose work work focuses particularly on issues of tax fairness and sustainability.