Tags: Frank | taxes | unfair | poor

CNBC's Frank: Argument That State Taxes Are Unfair to Poor Is Flawed

By    |   Friday, 16 January 2015 10:46 AM

A new report about state and local taxes claiming they are "unfair" for the poor and middle class has received substantial media attention recently.

But the study by the Institute on Taxation and Economic Policy doesn't present a complete picture of the tax impact, says CNBC wealth columnist Robert Frank.

The study states that "virtually every state's tax system is fundamentally unfair, taking a much greater share of income from low- and middle-income families than from wealthy families."

However, the survey doesn't take into account federal taxes, Frank notes.

"Federal taxes account for two-thirds of the taxes that Americans pay. So while it's true that state and local taxes by themselves are regressive, Americans pay far more in federal taxes, which are far more progressive with the rich paying a higher share."

The wealthiest 1 percent of Americans pay 33 percent of their pre-tax income in federal taxes, while the middle class pays 14 percent and the poorest pay 3.1 percent, according to the nonpartisan Tax Policy Center,

Combining federal, state and local tax burdens as a share of income will almost surely show that the wealthiest pay the most, Roberton Williams of the Tax Policy Center tells Frank.

"Looking at state and local taxes gives you one picture of the impact of taxes," William notes. "But you can't look at them in isolation."

"Any analysis of 'fairness' should include the whole tax system, not just one part of it," Frank explains.

Meanwhile, a new survey from the Pew Research Center shows that 54 percent of the nation's wealthiest residents maintain that "poor people today have it easy because they can get government benefits without doing anything in return."

In contrast, only 36 percent of the wealthy think that "poor people have hard lives because government benefits don't go far enough to help them live decently."

Not surprisingly, among the least wealthy people, only 29 percent subscribe to the former view, while 67 percent opt for the latter.

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A new report about state and local taxes claiming they are "unfair" for the poor and middle class has received substantial media attention recently.
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2015-46-16
Friday, 16 January 2015 10:46 AM
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