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A just way to fix state budgets

All 50 states have regressive tax structures: the lower your income, the larger share of it goes to state taxes. While a few states have flat income-tax rates--here in Illinois, everyone pays 5 percent--most are mildly progressive (higher rates for higher income). But when you throw in regressive sales, property and excise taxes, each state's total tax burden falls hardest on those with the least to spare.

Meanwhile, states are facing major budget crises, requiring drastic spending cuts, revenue increases or both.

Via Ethics Daily, United for a Fair Economy offers a solution to both problems: invert the tax structure to make it progressive--and raise more money. A new report from the anti-inequality group analyzes data from each state and calculates how much more money could be raised if you split the population into fifths by income and then flipped the overall state tax rates.

In Illinois (pdf), the poorest fifth of the population pays 13.0 percent of its income in state taxes, while the richest fifth pays 6.2 percent. Switching these numbers--and doing the same with the second-poorest and second-richest groups--would increase state revenue by more than 50 percent. (Those of us in the middle fifth income-wise would stay at the same rate.)

It's an elegantly simple proposal. It'll never happen, of course--the political hurdles would be insurmountable. Still, an exercise like this is valuable. It highlights a startling reality: states hit poor people up for a greater share of their money than they do rich people. The fact that reversing this would pull states out of near-bankruptcy is only a secondary reason to do it. The main reason is that the current situation is shockingly unfair.

Elsewhere, Sylvester Schieber and Phillip Longman offer a smart analysis of state fiscal issues: unions aren't the problem, but pensions are a big part of it--and the solution may lie in empowering voters to keep lawmakers from using pensions to kick financial problems down the road.

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Not the whole picture.

Why do lower income people pay a higher percentage of their income in state taxes? It's called MATHEMATICS. If you owe 10 bucks in taxes that's 10% if you make $100 per year and 12.5% if you make $80 per year.

Of course, you are not factoring in everything (e.g., feds), such as the earned income tax credit which has lower income people actually getting money back from the government.

Another error is that you assume a static system rather than a dynamic one. If you jack up tax rates to astronomical levels you will find wealthier individuals implementing tax-avoidance strategies, the worst of which will be taking their job-producing capital OUT of the state. Ergo, punitive taxes will end up costing the state money.

The best way to help low income people is by providing them with more job opportunities. What you are proposing will have the opposite effect.

>Why do lower income people

>Why do lower income people pay a higher percentage of their income in state taxes? It's called MATHEMATICS.

Correct: tax responsibility is calculated with math. And if the tax structure were different and relied more on progressive taxes and less on regressive ones, then the math would be different. I'm in favor of this.

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> each state's total tax

> ... each state's total tax burden falls hardest on those with the least to spare. ...

> ... states hit poor people up for a greater share of their money than they do rich people. 

When I go grocery-shopping, the cashier doesn't care how much money I have to spare, nor how great a share of my money I'm being asked to part with. It's not immediately obvious why tax authorities should care to the extent you seem to think.

Because state tax

Because state tax authorities, unlike grocery-store cashiers, have a job description that includes looking out for the well-being of all state residents. A progressive tax structure would better accomplish this.

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