State Taxes and the Poor



The Motley Fool reports that "many states have tax structures that make poor people pay a far greater percentage of their incomes in taxes than those who are better off." They identify six states that tax the poor the hardest. Perhaps you can identify which three of these seven states made the list:
1) Alaska  2) Florida  3) Nevada  4) South Dakota  5) Texas  6) Washington  7) Wyoming 
Interesting that all of these states do not have a state income tax but only three made the list of six states. Here is what the Fool says about state tax codes and how the affect the pporest amongst us.
States that rely on sales taxes more than income taxes tend to be harsher on the poor, who have to pay a greater percentage of their incomes on living expenses that are often subject to sales tax.
The writers contrast the disparity of effective tax rates in these states. The largest disparity has the poor paying 16.9% of their income in taxes, while the figure for the richest citizens is 2.8%. Interesting numbers. Wonder if this disparity is representative of how a national sales tax would affect the poor?


2 comments:

  1. And that is the problem with sales tax, in general. Unless very specifically set to not impact the necessities of life, it's a regressive tax.

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    Replies
    1. Thanks Brian. I do wish that the tax code was simpler. Even so, we should not make it simpler if it taxes the poor more than those who make more money.

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