Which State Has the Most Regressive Tax System?

The Atlantic: “According to a study by economists at the Federal Reserve, Tennessee, Mississippi, and West Virginia have structured their tax codes so that middle and lower-income families pay a bigger share of their incomes than wealthy families do.”

“Tennessee has taken this strategy the furthest: The state has the most regressive tax system in the country, according to the study: It has no state income tax (though it does tax interest on stocks and bonds) and, instead, the state relies on sales taxes and other fees to fill its coffers, although many luxury items are tax-free. Additionally, attorneys’ fees, services such as haircuts and massages, and goods for horses and airplanes are all tax-exempt.”

“Last November, voters passed a constitutional amendment that banned the state from levying any income or payroll tax … But no income tax doesn’t mean there are no taxes. Tennessee has one of the highest combined local-state sales-tax rates in the country, at 9.45 percent, according to the Tax Foundation.”

“According to the Fed study, tax codes in some states, such as Minnesota, Oregon, and Wisconsin, ‘substantially mitigate income inequality.’ Those states make their tax codes more equitable by exempting basic necessities from sales taxes, and by offering a significant state-level Earned Income Tax Credit.”

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  • snickering

    I’ll bet Southern States are the worst.

    • moderatesunite

      mostly, but a few blue states are surprisingly bad too, Washington state is pretty terrible on this.

    • moderatesunite

      mostly, but a few blue states are surprisingly bad too, Washington state is pretty terrible on this.

  • DKDC

    Good job Minnesota and Oregon.

    • gjetsonpdx

      No sales tax in Oregon. I think it’s been voted down by referendum 7 times in all.

      • CaptainCommonsense

        I somewhat envy those who live in Vancouver Washington (no income tax) and shop in Oregon (no sales tax)…

        • Lorehead

          Their commute is horrible because a bunch of conspiracy theorists voted down a new bridge over the Columbia river.

          • CaptainCommonsense

            LOL, tell me more! This makes me curious and amused!

          • Lorehead

            The project was called the Columbia River Crossing and the sticking-point was that it would have included light-rail. A group of activists north of me delusionally convinced themselves that the light-rail system in Portland is going to collapse any day now and this was somehow a conspiracy to make them pay for a bailout. So they managed to block any construction from being done on the northern side, killing the bridge that would have benefited primarily them after tens of millions had already been spent.

          • Lorehead

            Anyway, the major disadvantages of not having a sales tax are that it’s harder to evade one and revenues collapse less in a recession. In particular, people working in the black market don’t report their income, but do pay sales tax and do directly or indirectly pay property tax.

  • Arkenblaster

    Is there a comparison of the tax income generated per state (regardless of method)? Regardless of where it comes from, I wonder how far apart states are in generating tax revenue (while accounting for differences in population size).

  • Vista-Cruiser

    Uh oh; shouldn’t have disclosed that Wisconsin is one of the states in which taxes mitigate income equality. Scott Walker and his allies running the state legislature will work quickly to reverse that, until Wisconsin is more like Tennessee.

  • Vista-Cruiser

    Uh oh; shouldn’t have disclosed that Wisconsin is one of the states in which taxes mitigate income equality. Scott Walker and his allies running the state legislature will work quickly to reverse that, until Wisconsin is more like Tennessee.

  • pbrower2a

    Dixie had as its ideal the self-contained plantation, a fortress from taxation of the owners, with any other economic ways of life being taxed to the fullest. Live off the plantation and get taxed heavily.

    Mississippi is a great place to live if you are a big landowner. Otherwise it is horrible.

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