The Worst States To Be Poor In

The Institute on Taxation and Economic Policy just released a report on the correlation between income and the economic burden of state taxes, and the results may surprise you. States like Texas, Washington, and South Dakota, which do not have income tax, put a heavier burden on their poorer residents. This is because their state and local taxes are higher for everyone.

In Washington, the poor pay a whopping 17% of their income in taxes, while the wealthiest 1% of residents pay only 2.4% of their income. Washington, like the other states mentioned, rely a great deal on sales tax for revenue, and poorer people tend to spend about 75% of their income on taxable items, while wealthy people only spend about 17%.

This isn’t to say that these takes have outrageous taxes overall. In fact, they’re mostly low-to-moderate tax states, but the taxes they do have burden their least wealthy citizens excessively. However, every single state in the U.S. has taxes that are skewed towards the poor. The ones where the gap is smallest are Oregon, California, Delaware, Montana, and the District of Columbia.

To an extent, federal taxes in their present state offset this burden by being extremely progressive. They tend to narrow the income inequality gap with tax breaks, like the Earned Income Tax Credit. However, with tax reform on Congress’ agenda this year, that may change.