How State Lawmakers Can Use Their Tax Codes to Fight Poverty


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Poverty, income-inequality, and stagnant wages have been a major part of the political discourse this election cycle. And for good reason. Although new Census data reveal a substantial drop in poverty and a significant increase in income, median household income is still less than it was in real dollars 17 years ago, and 43 million (or nearly one in seven) people in this country live in poverty.

Fortunately, state lawmakers have a range of policy options to mitigate poverty and improve the quality of life of families across the country. ITEP today updated its annual report, State Tax Codes as Poverty Fighting Tools. The report, incorporates the U.S. Census Bureau’s ACS data and makes the case for four key anti-poverty tax policies: state Earned Income Tax Credits (EITCs), property tax circuit breaker programs, targeted low-income credits, and childcare related tax credits. These policies, when well-structured, can provide families with additional income, putting that money back in their pockets to help pay for food, housing, transportation, and other necessities.

Reforming state tax systems should be a priority for state lawmakers across the country. ITEP’s bi-annual report, Who Pays? reveals that when all taxes levied by state and local governments are taken into account, every state imposes higher effective tax rates on their poorest families than the richest 1 percent of taxpayers. Across the country the effective tax rate for the poorest 20 percent of taxpayers is 10.9 percent, more than double the 5.4 percent average effective tax rate for the top 1 percent.

For better or worse, our priorities are reflected in our tax codes. Reforming tax systems in a way that ensures the lowest-income families are not paying a greater share of their income to fund services on which we all rely should be a top priority for state lawmakers.

We recommend that states enact, or strengthen, one or more of four proven and effective tax strategies to reduce the share of taxes paid by low- and middle-income families and increase their ability to make ends meet.

Misha Hill contributed to this report

Thank you for visiting Tax Justice Blog. CTJ and ITEP staff will soon retire this domain. But ITEP staff are still blogging! You can find the same level of insight and analysis and select Tax Justice Blog archives at our new blog, http://www.justtaxesblog.org/

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