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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