AUSTIN, TX — Texas’ tax system is upside-down, with the wealthy paying a far lesser share of their income tax than low- and middle-income families. According to the Institute on Taxation and Economic Policy (ITEP), the tax code is the seventh most regressive in the nation, a stark contrast to “high-tax” states like California where families most able to contribute to the support of public services pay 12% of their income in taxes. ITEP’s comprehensive Who Pays? report is the only distributional analysis of tax systems in all 50 states and the District of Columbia. The report measures the effects of each state’s tax system on income inequality and includes key findings that demonstrate the impacts of a comparatively high reliance on regressive taxes, including: - The lowest-income 20% of taxpayers face a state and local tax rate 178% higher than the top 1% of households. The average effective state and local tax rate is 12.8% for the lowest-income 20% of individuals and families, 9.9% for the middle 20%, and 4.6% for the top 1%.
- Texas has the seventh most regressive tax system in the nation; only Florida, Washington, Tennessee, Pennsylvania, Nevada, and South Dakota fare worse.
- Texas is one of 42 states that tax the top 1% less than every other income group, and one of 35 states that tax their poorest residents at a higher rate than any other group.
“Tax policy isn’t just about revenue; it’s a tool for fairness and justice,” said Marisa Bono, CEO of Every Texan. “The legislature has the power to shape tax policy to benefit everyone and build a stronger, more equitable future for our state.” The report finds tax systems in 44 states exacerbate inequality by making incomes more unequal after collecting state and local taxes, while systems in six states and D.C. reduce inequality. On average across the country, the lowest-income 20% of taxpayers face a state and local tax rate nearly 60% higher than the top 1% of households. The nationwide average effective state and local tax rate is 11.3% for the lowest-income 20% of individuals and families, 10.5% for the middle 20%, and 7.2% for the top 1%. “When you ask people what they think a fair tax code looks like, almost nobody says we should have the richest pay the least. And yet when we look around the country, the vast majority of states have tax systems that do just that,” said Carl Davis, ITEP’s Research Director. “There’s an alarming gap here between what the public wants and what state lawmakers have delivered.” ### ABOUT THE REPORT
Who Pays? is the only distributional analysis of tax systems in all 50 states and the District of Columbia. The comprehensive report assesses the progressivity and regressivity of state tax systems by measuring effective state and local tax rates paid by all income groups. No two state tax systems are the same; this report provides detailed analyses of the features of every state tax code. It includes state-by-state profiles that provide baseline data to help lawmakers and the public understand how current tax policies affect taxpayers of all income levels. More than 99% of all state and local taxes, measured by their revenue contribution, are included in the analysis. ABOUT EVERY TEXAN
Every Texan believes that social justice requires public policy. Since its founding in 1985, Every Texan has leveraged public policy to expand opportunity and equity for Texans of all backgrounds. Every Texan is an independent nonprofit organization that researches, analyzes, and advocates for public policies to achieve equitable access to quality health care, food security, education, and good jobs. Our bold, research-driven legislative priorities dare Texas leaders to make Texas the best state for hard-working people and their families. Learn more at everytexan.org. ABOUT ITEP
ITEP is a non-profit, non-partisan tax policy organization. We conduct rigorous analyses of tax and economic proposals and provide data-driven recommendations on how to shape equitable and sustainable tax systems. ITEP’s expertise and data uniquely enhance federal, state, and local policy debates by revealing how taxes affect people at various levels of income and wealth, and people of different races and ethnicities. |
