Comprehensive new 50-state study from Institute on Taxation and Economic Policy also shows middle-income families pay more
RALEIGH (January 30, 2013) – Like most state tax systems, North Carolina takes a much larger share from middle- and low-income families than from wealthy families, according to the fourth edition of “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States,” released this morning by the Washington-based Institute on Taxation and Economic Policy (ITEP).
Combining all of the state and local income, property, sales and excise taxes North Carolina residents pay, the average overall effective tax rates by income group are 9.8 percent for the bottom 20 percent, 9.4 percent for the middle 20 percent, and 6.5 percent for the top one percent. Nationally, those figures are 11.1 percent for the bottom 20 percent, 9.4 percent for the middle 20 percent, and 5.6 percent for the top one percent.
“We know that governors and legislators nationwide are promising to cut or eliminate taxes, but the question is who’s going to pay for it,” said Matthew Gardner, Executive Director of ITEP and an author of the study. “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."
The income tax in particular is being targeted for elimination by self-described tax reformers across the country, including North Carolina, where proposals have surfaced from the Senate leadership to eliminate – or significantly reduce – the personal and corporate income tax.
“The data released today confirms that North Carolina has an upside down tax system which will be made worse if current tax proposals move forward,” said Alexandra Sirota, Director of the Budget & Tax Center, a project of the NC Justice Center. “Significant cuts to the personal income tax or elimination of the tax will shift the load to middle- and low-income taxpayers, all while failing to deliver more jobs.”
Who Pays? shows that of the ten most regressive states, four do not have any taxes on personal income, one state applies it only to interest and dividends, and the other five have a personal income tax that is flat or virtually flat across all income groups.
“Cutting the income tax and relying on sales taxes to make up the lost revenues is the surest way to make an already upside down tax system even more so,” Gardner said.
The data in Who Pays? also demonstrates that states commended as “low tax” are often high tax states for low- and middle- income families. The ten states with the highest taxes on the poor are Arizona, Arkansas, Florida, Hawaii, Illinois, Indiana, Pennsylvania, Rhode Island, Texas, and Washington.
The fourth edition of Who Pays? 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.
The full report is available online at www.whopays.org.
The Institute on Taxation and Economic Policy (ITEP) is a 501 (c) (3) non-profit, non-partisan research organization that works on federal, state, and local tax policy issues. ITEP's mission is to ensure that elected officials, the media, and the general public have access to accurate, timely, and straightforward information that allows them to understand the effects of current and proposed tax policies. www.itep.org.
FOR MORE INFORMATION CONTACT: Anne Singer, ITEP, 202-299-1066, ext. 27; Alexandra Forter Sirota, BTC Director, Alexandra@ncjustice.org; Jeff Shaw, Director of Communications, firstname.lastname@example.org, 503.551.3615 (cell).