Tax Structures Said to Benefit Affluent Most

Poor people in most states pay nearly twice the percentage of their income in state and local taxes as the affluent pay, and the middle class pays a third larger percentage, says a report released Monday.

The poor devote an average 13.8% of their income to state and local taxes, while middle-income people pay 10% and the richest 1% of the population pay 7.6%, says the report by Citizens for Tax Justice in Washington.

“Most states put too much of the tax burden on those who can least afford to pay,” said Bob McIntyre, the group’s director. McIntyre, who formerly worked for consumer advocate Ralph Nader on tax issues, said this policy has not served states particularly well because “it doesn’t raise much in the way of revenues, since the poor don’t make much.”

After a comprehensive yearlong study, the group also compiled a list of what it called the “Terrible Ten” states--those that tax the poorest 20% at three to five times the rates paid by the richest 1%, and middle-income families at two to three times the rate applied to the richest families. Those states are: Nevada, Texas, Florida, Washington, South Dakota, Tennessee, Wyoming, New Hampshire, Pennsylvania and Illinois.

The study showed Washington, Texas and Nebraska have the highest taxes on the poor; Nevada, Wyoming and Alaska have the lowest taxes on the rich.

Only two states--Vermont and Delaware--have an “even slightly progressive” tax system, McIntyre said.

He urged that more states adopt progressive, graduated income taxes--eight of the Terrible Ten levied no income tax at all--and perhaps reduce regressive sales and gasoline taxes.

McIntyre acknowledged that the poor benefit immensely from government services, but said the rich can make more money if their communities have sufficient tax revenues to support, say, a well-educated work force and good roads.

“In terms of day-to-day living, I think the poor people depend the most. (But) in terms of actually making money, I think the rich people depend the most,” he said.

Most states haven’t gotten any more regressive since 1985, McIntyre said. But seven states did cut taxes on the rich while raising taxes on almost everyone else: Connecticut, South Dakota, West Virginia, Alaska, Nevada, Tennessee and Washington.

The tax patterns of the 1980s--including that on the federal level--contributed to a gradual shift of wealth to the upper class, the group said. The income of the top 1% grew 86% in constant dollars from 1977 to 1990, while their after-tax income grew 110%. Meanwhile, the income of the poorest 20% declined 14%, as did their after-tax income.

In addition, the poor have been hit with cuts in federal and state welfare programs, the study noted.

It defined poor as a family of four with a total annual income of $12,700 a year; a middle-class family made at least $39,100, and, the top 1% made at least $875,200.