Tax Fairness: An Answer to State Budget Problems

Inequitable Tax Codes Cost States Up to $128 Billion Annually

Taxing Top Incomes at the Same Rate as the Middle Class Could Fund Critical State Priorities, Including Education, Infrastructure, and Public Pensions

Keystone Research Center and Good Jobs First
February 2015

The top one percent pays less than 60% of the tax rate of the middle classThis report shows that states could generate large amounts of additional revenue to meet public needs by fixing inequities in state tax codes. The study shows that surging inequality has skewed huge amounts of income to the one percent, who pay far lower tax rates than the middle class, squeezing state budgets unnecessarily.

Taxing the top one percent at the same rate as the middle fifth of taxpayers would generate $68 billion in additional revenue, while taxing the top fifth at the same rates as the middle fifth would generate $128 billion.

Revenue lost because of rising inequality and regressive state tax codes has led states to impose years of unnecessary austerity—underfunding schools, cutting investments in higher education, and deferring maintenance of our aging infrastructure.

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Note.The original version of this report posted on February 13 mistakenly used the revenue generated from the tax rate increases shown in Table A2 instead of Table A1. That error is corrected in the new version linked above.