Report Assesses State Tax Systems
The recent report by the Institute on Taxation and Economic Policy (ITEP) assessed the fairness of state and local tax systems among 50 states. The report identified ten states as having the most regressive overall tax systems. The ITEP identifies these states as “Terrible Ten” states, where the bottom 20 percent pay up to six times as much of their income in taxes as their wealthy counterparts. Washington State is the most regressive, followed by Florida, South Dakota, Illinois, Texas, Tennessee, Arizona, Pennsylvania, Indiana, and Alabama. That is largely contributed to heavy reliance on sales taxes, which burdens the bottom 20 percent more than the top 1 percent.
The ITEP report calculates their tax burden as a combination of all of the state and local income, property, sales and excise taxes state residents pay. The average overall effective tax rates by income group nationwide are 11.1 percent for the bottom 20 percent, 9.4 percent for the middle 20 percent and 5.6 percent for the top 1 percent.