Top 1 percent paying lower tax rates than other residents in most states: Study

The wealthiest households in most states pay lower tax rates than other households, a new analysis finds.

New research conducted by Institute for Tax and Economic Policy They analyzed the tax system in all 50 states and Washington, D.C., by examining how seven different income groups pay state and local tax rates.

The study ultimately found that the lower your income, the higher your overall effective state and local tax rate.

“On average, the lowest-income 20 percent of taxpayers face state and local tax rates that are nearly 60 percent higher than the top 1 percent of households,” the analysis states.

The analysis found that in 41 states, the top 1% of households pay lower tax rates than other households. The study found that in 42 states, the top 1% of earners pay less in taxes than the bottom 20%, and in 46 states, the top 1% pays less in taxes than the middle 60%.

The bottom 20 percent are taxed at the lowest rates in just six states: Washington, D.C., and New Mexico, New Jersey, New York, Vermont, Minnesota, and Maine. The study found that 34 states tax low-income households at higher rates than other households.

The analysis warned that taxing wealthy people at lower rates than lower-income households could hinder states' ability to raise revenue.

“In other words, not only do wealthy people, on average, pay lower effective rates of state and local taxes than lower-income people, but they collectively contribute a lower percentage of their total income to state and local taxes. That is, it is less than the proportion that accounts for it.''Research status.

“This limits states' ability to raise revenue, especially as inequality widens. Research shows that when income growth is concentrated among the wealthy, taxes fall disproportionately on low- and middle-income households. “We know that states with high levels of dependency experience slower state revenue growth.”