It is hard to go even a week without seeing a politician or a news article hype up a state as the place that everyone is moving to — or should move to — because of low taxes. However, there’s a big problem with these proclamations: They aren’t true.
In reality, the states that get the most attention — such as Florida, Tennessee and Texas — have low taxes only for the wealthy. These states have average taxes for middle-class families, and levy some of the highest rates in the nation on low-income and working-class families. That’s because their state tax codes are regressive, meaning that those who have the highest incomes pay the lowest share of their income in taxes, and vice versa.
That’s one of the important takeaways in “Who Pays?” a recent study published by the Institute on Taxation and Economic Policy, where I serve as deputy director. It’s the only 50-state analysis of how state and local tax codes affect families across the income scale.
Take Florida. Despite its reputation for stealing away hordes of people from northeastern states with its low taxes (we won’t mention the beaches and warm weather), Florida features low taxes only for those at the top of the income scale . The lowest effective tax rates as a percentage of income are reserved for the wealthiest 1 percent of households.