Poor, middle class hit harder on taxes, study finds

A study released today by the Institute on Taxation and Economic Policy finds that, "by an overwhelming margin, most states tax their middle- and low-income families far more heavily than the wealthy."

"The harsh reality is that most states require their poor and middle-income taxpayers to pay the most taxes as a share of income," said Matthew Gardner, lead author of Who Pays? A Distributional Analysis of the Tax Systems in All 50 States.

The study contains fact sheets for each state. For Colorado, the study found:

• Colorado families earning less than $20,000 per year paid 9% of their income in state and local taxes.
• Middle-income families making $39,000 to $59,000 paid 8.5% of their income in state and local taxes.
• For wealthy Coloradans, the portion paid in state and local taxes drops as income grows:
$99,000 to $209,000 – 7.3 percent of income
$209,001 to $557,000 – 6.2 percent of income
$557,001 and up – 5.3 percent of income

"Fairness is in the eye of the beholder," said Gardner. "But virtually anyone would agree that this upside-down approach to state and local taxes is astonishingly inequitable."

“In the coming months, many states’ lawmakers will convene to deal with fiscal shortfalls even worse than those they faced last year,” Gardner said. “Lawmakers may choose to close these budget gaps in the same way that they have done all too often in the past – through regressive tax hikes. Or they may decide instead to ask wealthier families to pay tax rates more commensurate with their incomes. In either case, the path that states choose in the upcoming year will have a major impact on the well-being of their citizens – and on the fairness of state and local taxes.”

To read the report and fact sheets, click here.