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Like most state tax systems, West Virginia takes a larger share from middle- and low-income families than from wealthy families, according to the fourth edition of “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States,” released today by the Washington-based Institute on Taxation and Economic Policy (ITEP). Combining all state and local taxes (income, property, sales and excise) West Virginia residents pay, the average overall effective tax rates by income group are 8.7 percent for the lowest income families, 8.9 percent for middle class families and 6.3 percent for top income earners. The full report is online at www.whopays.org.
“We are asking struggling families to pay a larger share of their income in taxes than those who are living paycheck-to-paycheck. This report not only highlights how West Virginia’s tax system compares to other states, but also why policymakers should implement a state Earned Income Tax Credit that will help level the playing field,” stated Ted Boettner, Executive Director with the West Virginia Center on Budget and Policy.
“We know that governors nationwide are promising to cut or eliminate taxes, but the question is who’s going to pay for it,” said Matthew Gardner, Executive Director of ITEP and an author of the study. “There’s a good chance it’s the so-called takers who spend so much on necessities that they pay an effective tax rate of 10 or more percent, due largely to sales and property taxes. In too many states, these are the people being asked to make up the revenues lost to income tax cuts that overwhelmingly benefit the wealthiest taxpayers.” State consumption tax structures are particularly regressive, with an average 7 percent rate for the poor, a 4.6 percent rate for middle incomes and a 0.9 percent rate for the wealthiest taxpayers nationwide.
The income tax in particular is being targeted for elimination by self-described tax reformers across the country, and Who Pays? shows that of the ten most regressive states, four do not have any taxes on personal income, one state applies it only to interest and dividends and the other five have a personal income tax that is flat or virtually flat across all income groups. “Cutting the income tax and relying on sales taxes to make up the lost revenues is the surest way to make an already upside down tax system even more so,” Gardner stated.
The data in Who Pays? also demonstrate that states commended as “low tax” are often high tax states for low- and middle- income families. The ten states with the highest taxes on the poor are Arizona, Arkansas, Florida, Hawaii, Illinois, Indiana, Pennsylvania, Rhode Island, Texas, and Washington. “When you hear people brag about their low tax state, you have to ask them, low tax for who?”
The fourth edition of Who Pays? measures the state and local taxes paid by different income groups in 2013 (at 2010 income levels including the impact of tax changes enacted through January 2, 2013) as shares of income for every state and the District of Columbia. The report is available online at www.whopays.org.
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The West Virginia Center on Budget and Policy is a public policy research organization that is nonpartisan, nonprofit, and statewide. The Center focuses on how policy decisions affect all West Virginians, especially low- and moderate-income families.
The Institute on Taxation and Economic Policy (ITEP) is a 501 (c) (3) non-profit, non-partisan research organization that works on federal, state, and local tax policy issues. ITEP’s mission is to ensure that elected officials, the media, and the general public have access to accurate, timely, and straightforward information that allows them to understand the effects of current and proposed tax policies. www.itep.org.
