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FISCAL ANALYSIS:
The Great Progressive Rate Scam
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Buttressed by the notion that our progressive tax system already places an outsized burden on top income earners, foes of tax increases have gained impressive and steady ground with this argument over the last few decades. Because conservative media voices are so much louder and more ubiquitous than their opposition, those who are not wealthy have in many cases been shamed into believing that the government services and infrastructure they enjoy owes a great deal to the largesse of their states' rich taxpayers, and that asking them to pay more than they already do constitutes a further affront to fairness in an already unfair and fundamentally redistributive system of taxation.
But close scrutiny of the actual tax figures shows these concerns to be fundamentally misplaced. As a recent study by the Institute on Taxation and Economic Policy shows, contrary to received notions and the conventional wisdom, our nation's state tax systems are, in fact, remarkably regressive. For, while it is true that Income Taxes do indeed follow a progressive schedule, when one factors in Sales, Property and Excise Taxes, it quickly becomes apparent that, at the national level, the lowest 20% of wage earners pay about 11.4% of their income in taxes, while the top 1% pay only about 7.3%.
It is a stunning revelation, and the opposite of what Americans have by and large come to believe is true.
All other taxpayers bear tax burdens that fall somewhere in between these extremes, but these, here again, follow a pattern opposite what one would expect from a true system of progressive taxation. Tax burdens for all other taxpayers follow a sliding scale that decreases as income increases.
Examining the figures uncovered by the ITEP study, one learns that by far the most regressive state in the Union is Washington, where the bottom 20% pay an astounding 17.6% of their total income to the state, while the top 1% pay only 3.3%.
As for Maryland, while it is true that our state tax burden may not be as regressive as that of the worst offenders, here too the notion of a progressive tax system is clearly shown to be a myth: The ITEP study shows that the bottom 20% of Marylanders hand over 9.8% of their income to the State while the top 1% pay only 7.8%, and these figures come in before the Federal tax offset that leaves the bottom 20%’s tax burden unchanged, but lowers the effective rate on the top 1% to just 5.6%.
As Governor Ehrlich and the Maryland State Assembly debate the necessity, the propriety, and most importantly, the sorts of tax increases that will be necessary to narrow the state's looming budget deficit, it is important that neither the legislature nor the citizens of Maryland lose sight of the true nature of taxation as it takes place in the Old Line State.
Mr. Flores writes from Baltimore County. He refers readers to the following source: "Who Pays? A Distributional Analysis of the Tax Systems in All 50 States," 2nd Ed., by McIntyre, Denk, Francis, Garder, Gomaa, Hsu, Sims, published by The Institute on Taxation and Economic Policy, Jan 2003. Washington DC.
David Flores is director of the Language Learning Center at Loyola College in Maryland. He was born in Morelia, Michoacan, Mexico in 1969 of an American mother and a Mexican father, and lived in Mexico until coming to the US for secondary and higher education. He writes, “I was a lifelong Democrat until the October 11 congressional authorization that saw 29 Democratic Senators vote to give Bush the power to unilaterally invade Iraq. Shortly thereafter I became a registered Green.”
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This story was published on May 13, 2003.
