This past week the Institute on Taxation and Economic Policy (ITEP), released their latest “Who Pays” tax analysis. A breakdown of virtually all state and local taxes for all 50 states, and perhaps not surprisingly – West Virginia has some explaining to do.
It was found that the lowest-income West Virginians pay 21 percent more in taxes as a percent of their income compared to the state’s wealthiest income earners.
This means that West Virginia’s tax structure is considered “regressive”, meaning that poor and middle income folks pay MORE in taxes on average than the rich.
Why do we think it’s okay to tax our poorest West Virginians, often struggling to afford food and rent, more than those who make six figures? It makes little sense if the goal is to provide a level playing field. That is the goal, right?
Although West Virginia’s current tax structure is highly questionable, overall wealth disparity in states like Washington, Texas, and Florida is astronomical. The ITEP ranks these states as the top 3 most regressive in the nation – all taxing the poor more.
Regressive tax rates are becoming more broadly used across the country causing a widening of the insidious wealth gap.
So, what makes a tax structure more equitable?
According to the folks at the ITEP:
“All of the most equitable tax systems include personal income taxes which are progressive (but to varying degrees). California’s overall tax system is relatively progressive largely because of graduated marginal income tax rates, additional tax on income over $1 million, and limits on tax breaks for upper-income taxpayers.”
I would be remiss if I did not include the fact that Personal Income Taxes for low income West Virginians is lower than that for higher earners. Coming in at about 2.5 percent for middle income earners and 4.6 percent for the top 1 percent. This would be considered “progressive“, meaning that folks with larger incomes pay more in taxes than those with lower incomes.
This does not change the fact that West Virginia’s wealth disparity is bad for average earners.
The ITEP analysis mentions that growing income inequality actually worsens overall state revenues over time.
“Research shows that when income growth concentrates among the wealthy, state revenues grow more slowly, especially in states that rely more heavily on taxes that disproportionately fall on low- and middle-income households.” (2)
Simply put, as the rich get richer – states gets poorer.
This isn’t about shaming rich people or giving handouts – it’s about creating fair share economic practices by building more equitable tax structures where everyone has an honest chance to climb the money tree.
So, let’s do better – fast.