JACKSON, Miss. — Farish Street has an all-too-familiar story. 

Once a booming Black-owned entertainment and business district that drew Black customers from all over Mississippi, it struggled after segregation ended. Today, it suffers from the same blight and infrastructure issues as many other Jackson neighborhoods — and far too many once-segregated communities across the country.

I decided to visit Farish Street to get the perspective of small business owners on the state’s tax cut policies for an investigation published this week about a wave of such cuts pushed by conservative groups. Several told me that the state’s income and corporate tax cuts rarely benefit the Black business owners there. 

“The tax cuts are for big businesses and the rich,” said Eric Collins, owner of Herbal Blessings, a health food store and vegan cafe. “As for the support our small businesses get from the state? It’s very little.”

Marshall’s Music and Bookstore, owned by Maati Jone Primm, is located a few doors down. Primm’s grandmother, an activist who came to Jackson from nearby Utica, started the bookstore 85 years ago. 

“This used to be a hotspot,” Primm said. “The elders will tell you that on a Saturday, Black people used to come from all over Mississippi to come to Farish Street. You used to have to walk sideways.”

Primm connects the way the state Legislature handles taxes to a longstanding practice in the state to oppress Black Mississippians. Its tax structure – and the new reforms – benefit the state’s wealthiest, who are mostly white. And the majority-white state Legislature has long starved majority-Black Jackson of tax revenue.  

She sees taxes as one tool in a box filled with policies enacted by the mostly white Legislature, including voter restrictions, limited access to medical care and underfunded public schools, that make it difficult for Black residents to thrive. 

“I feel like they are attacking us,” Primm said. “It’s plantation politics. It’s absolutely awful. You have all these different attacks. It’s almost death by a thousand cuts.” 

Part of that punishment, she said, is starving Jackson of tax revenue.

It’s not a new allegation. The NAACP and nine Jackson residents filed a Civil Rights Act complaint with the U.S. Environmental Protection Agency last year alleging that state decisions about Jackson’s access to tax revenue have reduced or blocked funds needed to maintain the city’s water supply, ultimately resulting in long-running problems accessing clean water. City residents suffered through a days-long outage last summer.

“It’s the culture of Mississippi that says they must oppress Black people,” Primm said. “They don’t want to share power, and they really don’t want to share resources.” 

Mississippi enacted a substantial income tax cut in 2022 that moved the state to a single tax bracket, regardless of how much you make. These “flat” taxes sound equitable, in that everyone is paying the same percentage of their income in taxes. But the rest of a state’s taxes don’t work that way, sales taxes especially, and the main way governments can avoid leaning most heavily on lower-income people is with income-tax rates that increase as earnings do. 

Mississippi’s tax structure already took a larger share of income from its poor and middle-income residents than its richest, according to an analysis by the Institute on Taxation and Economic Policy. The newest change will worsen that inequity. According to the group’s analysis, the state’s highest-income residents would receive an estimated $31,400 in tax cuts on average each year, while the lowest would get average savings of $20.

The state will likely see a $419 million reduction in revenue every year on average from the income tax cut, according to the University Research Center, a division of Mississippi Institutions of Higher Learning that studies state and local policies.

Primm is most concerned about what that could mean for Mississippi’s public education system, already underfunded and underperforming, especially in places with larger lower-income Black communities. 

Her great-grandmother, who was enslaved, created a school. A visit to Primm’s bookstore makes her passion for education clear. As I waited to speak with Primm, she was helping provide books for a local church group. She’s stocked her store with countless books on Black culture and history, from Maya Angelou poems to soul food cookbooks to nonfiction on medical discrimination and books detailing the history of how African slavery in the U.S. began. Primm has adorned its walls with pictures of freedom fighters; Black people who have been murdered throughout the country’s history, including Emmett Till and Trayvon Martin; and modern cultural icons, like Morgan Freeman and Oprah Winfrey.

Underfunding education is a form of disenfranchisement in itself, Primm said. 

“The largely white power brokers want to maintain the status quo and in order to do that, they need to disenfranchise us,” Primm said. “What they count on is the people to be silent for all of this and suffer in silence. I’m not going to do that.”

The post In a historic Black business district, ‘death by a thousand cuts’ appeared first on Center for Public Integrity.

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ABERDEEN, Wash. — Under an overcast sky, Patty Flores led a group of colleagues to an empty lot in the mobile home park where she lived. A bare patch of grass traced the outline of a home set ablaze in an electrical fire.

She saw it as a symptom of a larger problem, one that connected to her rising rent, the potholes pockmarking the street and the paradox that taking another job to cover the extra rent would require child care that she couldn’t afford.

The tax system in her state has long been one of the most inequitable in the country, leaning most heavily on the people with the least money. That, in turn, means less revenue to spend on services that can help people live less tenuous lives.

“I want to trust that there will be change,” Flores said. “I want a better life for my kids.”

When legislators proposed a bill in 2021 to increase taxes on Washington’s wealthiest residents and put the money toward child care and education, Flores was elated. She showed up to testify in support.

The bill passed. This year, the money started flowing in — hundreds of millions more than legislators anticipated. 

While efforts to pass a federal wealth tax are at a standstill, a nascent movement at the state level to get high-income people to contribute more to public coffers is beginning to notch successes. 

Washington state’s tax, on capital gains, overcame a court challenge in March. Massachusetts voters amended their constitution in November to tax millionaires at a higher rate. And legislators in eight more states introduced bills this year aimed at reforming tax systems that take a smaller share of household income from people with the most money than from people with the least. Those changes would yield hundreds of billions of dollars in potential new revenue. 

But this push is a far cry from the decades-long conservative effort to reduce taxes, particularly ones that higher-income people pay. 

Most of the recent tax-the-wealthy proposals never made it out of committee. The Washington and Massachusetts measures took years of efforts organized by local groups facing well-funded opposition. 

The State Innovation Exchange and State Revenue Alliance, two national groups now helping to coordinate state wealth-tax efforts, are outspent by billionaire-funded organizations that argue for yet more cuts. 

“The reality is wealthy people across this country wield enormous political power in terms of lobbyists, think tanks and organizations created to entrench their financial advantage,” said Kyle Huelsman, senior director of legislative affairs at the State Innovation Exchange. 

“We are really in a generational fight, and an incredibly disproportionate fight in terms of resources.” 

Washington and Massachusetts offer lessons for states wanting to make their tax systems more equitable. A big one: Drumming up the support can take a long time — and a lot of money. 

A ‘pure tax justice argument’

In Massachusetts, a constitutional amendment to increase taxes on the wealthy took a decade of advocacy work. Supporters gathered signatures to put it on the 2018 ballot, only to see it booted off by a court ruling after business groups sued. The Legislature then put it on the 2022 ballot, bypassing restrictions that doomed the other attempt.

A key reason that states take a higher share of household income from their lower-income residents than their wealthiest is sales tax. An income tax with different brackets — rates that go up as your income does — is the main tool states have to counterbalance that impact.

Massachusetts didn’t design its income tax that way. It had a single rate across income levels since its enactment in 1916, because its constitution required it.

That’s what the proposed amendment that went before voters in 2022 aimed to change. It called for an additional 4% income tax for millionaires on top of the state’s 5% flat tax. The proposal specified that revenue would go toward schools, public transportation, roads and bridges, more than 650 of which need repair. 

Labor, community and faith groups joined forces to support the ballot measure. Business interests and conservatives lined up in opposition.

The latter organized the Coalition to Stop the Tax Hike Amendment and raised more than $14 million to defeat it, with funders that included billionaires Jim Davis, the chairman of New Balance, and New England Patriots owner Robert Kraft, through his containerboard company. The Boston-based Pioneer Institute, a member of the State Policy Network, which advocates for tax cuts around the nation, wrote a book in opposition — “Back to Taxachusetts?”

While the money flowing to national tax-cutting groups is substantial, supporters of the Massachusetts amendment outspent the opposition. They did it by raising more than $32 million as Fair Share Massachusetts, a large part from teachers’ unions and other worker-funded groups. 

The conservative State Policy Network and its affiliates know that unions can be a key counterweight to the struggle over taxes. The groups’ solution: Cut off their opponents’ funding at the source. 

In a 2016 fundraising letter reported on by The Guardian, the State Policy Network said that “freeing teachers and other government workers from coercive unionism” would mean “permanently depriving the Left from access to millions of dollars in dues.”

Two of the network’s partner organizations provided free legal representation in a lawsuit that produced the 2018 U.S. Supreme Court ruling weakening public unions’ ability to collect membership fees.    

But that didn’t stave off a big-money battle in Massachusetts. Once the ballot measure survived a trip to the state’s high court, the decision was up to voters. 

Both coalitions made their pitch as the November election loomed. 

The Stop the Tax Hike group argued that the measure would impose one of the largest tax increases in state history, that the revenue could be put toward spending beyond the intended purposes, and that the results would leave small business owners “reeling from an unprecedented new financial hit.”

The Fair Share group pointed to Massachusetts Budget and Policy Center data showing that the wealthiest residents paid an average of 6.8% of their income in state and local taxes, while everyone else paid an average of 8.9%. Changing that, the group said, “is how we build an economy that works for everyone.”

“It became a pure tax justice argument,” said Phineas Baxandall, policy director of the Massachusetts Budget and Policy Center. “The richest need to pay their fair share.”

Voters approved the amendment, 52% to 48%.

The Pioneer Institute vowed to track the tax’s impact. State and national teachers’ unions “claimed that it would be a net benefit for the state. However, they ignore the negative impact on the overall economy while at the same time avoiding accountability when it comes to how those dollars are spent and whether or not we are doing a better job of educating our children,” Mary Connaughton, the group’s director of government transparency and chief operating officer, said in an email.

For Huelsman, Massachusetts demonstrated what’s possible. 

“They really put out the guiding light of an incredibly popular issue,” he said. 

The fight over taxes on the wealthy

Taxing wealthy people at higher rates than residents with less money isn’t a novel idea. That’s how the federal income tax is designed to work. But Congress has cut top tax rates in big ways over the past four decades, contributing to the growing gap between the rich and everyone else. 

And the U.S. doesn’t impose an annual tax on wealth, a person’s assets. A ProPublica investigation showed that loopholes in the system allow the country’s richest people to pay very low tax rates, when they owe anything at all.

Several other countries impose wealth taxes. In Norway, for instance, such taxes are levied up to 1.1%. Switzerland’s cantons — semi-sovereign states — have had them since the early 18th century, accounting for nearly 10% of canton and local tax revenues in 2018. Colombia and Spain both approved wealth taxes last year, the latter for 2023 and 2024 only. 

In the United States, though, proposals for a tax on the ultrarich, including from Democrats Sen. Elizabeth Warren of Massachusetts and Rep. Pramila Jayapal of Washington have stalled in Congress. That’s despite polling showing that the majority of Americans support the concept.

And in the past two years, at least 19 states have lowered their income taxes in ways that primarily benefit their most well-off residents, pushed along by conservative groups that include the State Policy Network.

All of that is energizing legislators and activists in Democratic-led states to band together to try to increase taxes on the wealthy — in some cases with actual wealth-tax proposals.

On Jan. 19, elected officials in eight states — Connecticut, New York, California, Washington, Hawaii, Maryland, Illinois and Minnesota — introduced legislation or held rallies for bills filed afterward. In March, Nevada legislators proposed a study on wealth taxes. It was the first public effort of a movement organized by State Innovation Exchange and State Revenue Alliance to move the needle on tax parity.  

They set the stage last summer, convening activists, think tanks and lawmakers from 10 states to strategize. Formed in 2014, State Innovation Exchange provides lawmakers with research, training, strategy and policy guidance to advance progressive legislation.

“One of the things that we saw really clearly in those conversations” was that “fights around wealth taxes were very siloed in individual states,” State Innovation Exchange’s Huelsman said. “But at the same time, the problem is very much felt across every state in the country in terms of the ultrawealthy avoiding taxes.”

The cohort met virtually once a month through April to share best practices and lessons learned. They’re planning an in-person meeting in September and are looking to add people from additional states.

How long it might take to see results outside of Massachusetts’ “millionaire tax” and Washington state’s capital gains tax remains to be seen. None of the proposals introduced this year have become law, and the infrastructure built to produce more tax cuts, especially tax cuts aimed at high-income people, is better funded.

According to 2021 tax filings, the most recent available, the State Innovation Exchange had just over $9 million in revenue. The fledgling State Revenue Alliance said it had about $2 million. 

Meanwhile, that same year, revenue at the conservative American Legislative Exchange Council (ALEC) and the State Policy Network was about $35 million combined. That doesn’t count the network’s state affiliates, which also raise money to advocate for tax cuts. 

And Americans for Prosperity, an influential State Policy Network partner whose lobbying efforts include tax cuts, had revenue of nearly $114 million.

They’re only some of the groups in the fight. Among U.S. think tanks conducting tax policy research or advocacy, organizations on the right have two-and-a-half times the money of the ones on the left, according to a 2020 study published in the Nonprofit Policy Forum journal.

ALEC and Americans for Prosperity did not respond to requests for comment. The State Policy Network, while not answering questions about funding disparities, characterized its tax-cut efforts as sensible.

“States have received record amounts of revenue in every year since the coronavirus pandemic,” Michael Lucci, State Policy Network visiting economy policy fellow, said in a statement provided to the Center for Public Integrity. “Cutting taxes provides relief and allows revenues to grow a bit less quickly than they otherwise would. Even some states that are not cutting taxes have struggled to figure out what to do with all the excess revenue.”

Temporary infusions of federal pandemic aid is part of the reason. Opponents of the tax cuts argue that budget consequences will follow.

“The same people and organizations who patiently packed the courts with judges who would take away our rights are the same who are making it harder to raise revenue for what our communities need,” Kristen Crowell, executive director of the State Revenue Alliance, said in an email. “For them, it’s a business decision — spend millions to avoid paying billions in taxes. For us, tax justice is woven into the fight for democracy, racial and economic justice.” 

‘We’ve suffered for so many years’

In 2019, Flores from Aberdeen went door to door, listening to low-wage workers in Washington state’s timber country talk about the problems they saw and the solutions they wanted. 

Flores was volunteering for Firelands Workers Action, a group that organizes and advocates on behalf of working people in rural and small-town swaths of the state. 

The survey results from over 200 conversations revealed pressing worries about affordable housing, health insurance, mounting disasters like wildfires and “impossible choices.”

“When the fires were coming through, they just had one cop car coming around to tell us to evacuate,” a veteran told Firelands volunteers. “No help getting out, nothing.” A social worker said that she paid as much for child care as she did on her mortgage. Asked what they thought should be done to help fix the challenges their communities faced, 69% of respondents said they supported taxing the rich.

In Washington state, “we live and breathe the regressive tax system every day through the many different ways we’re seeing our communities facing decades of disinvestment,” said Firelands’ executive director, Stina Janssen.

The nonprofit’s workers and volunteers sought to change that. They wanted to see investment by the state — one of nine without an income tax — that would usher in more affordable housing and public child care.

But there’s a history of pushback in the state when people have tried to change the tax system. 

In the early 20th century, the state relied on revenue from property taxes to fund the government — largely through farmland. But by 1930, the farm population dropped by nearly a third, placing a disproportionate amount of the tax burden on farmers’ shoulders. Many were unable to pay. 

A fraternal group called the Washington State Grange, which fought for the improvement of farmers’ lives through political action, spent years trying to get an income tax enacted. A ballot measure the group spearheaded passed by more than 70% of the vote in 1932. 

The Washington State Supreme Court overturned it the next year, arguing that its graduated rates violated the state constitution’s requirement “that all taxes shall be uniform upon the same class of property.” The high court did the same to another attempt a few years later.

The justices left intact new sales, business and occupation taxes. Washington’s system has largely been the same ever since: It relies heavily on state and local sales taxes that average more than 9% — among the nation’s highest. That’s why it leans hardest on the poor.

Washington’s constitutional requirement that all taxes be “uniform” has a backstory rooted in inequity: Slaveholders in Southern states pushed for the policy as a lucrative loophole.

“The ’personal property’ at issue in the adoption of the first uniformity clauses was not commercial wealth, tangible or intangible,” Robin Einhorn of the University of California, Berkeley, wrote in a Journal of Economic History article. “It was slaves.”

Uniformity clauses spread from there. But Massachusetts and Washington are among the few states where courts have interpreted it to prohibit different tax rates. 

Tax policy has been “used as a weapon against overburdened communities, especially the Black community,” said Sen. Joe Nguyễn, a Democrat who represents a Seattle-area district. “So for me, our tax structure is rooted in racism, is rooted in economic division, but it’s also a way for us to heal some of that from the past as well.”

Efforts in the early 2000s again fell short, including a ballot measure for a tax on the wealthy that failed after two of the state’s wealthiest residents helped fund the opposition in 2010. 

A decade later, Firelands and other tax reform proponents set their sights on capital gains. This time, they aimed for a clear message and strong public support. 

The 2021 bill filed from that effort called for levying a 7% tax on profits exceeding $250,000 from the sale and exchange of assets such as stocks and bonds. Lawmakers earmarked the revenue for early childhood education. 

More than 100 groups, including labor unions, human service organizations and immigrant rights nonprofits, teamed up to push the legislation forward. As soon as the Legislature passed it, several Washington residents represented in part by a State Policy Network affiliate, the Freedom Foundation, filed a lawsuit challenging the policy. 

“Washington has long benefited from its status as one of the few states without an income tax, though attempts by the political Left to impose one have continued unabated for about 90 years,” the Freedom Foundation’s director of labor policy, Maxford Nelsen, wrote in a statement at the time.

The group didn’t respond to requests for comment.

Flores, recalling that lawsuit, switched from English to Spanish at the Firelands office as Janssen, Firelands’ executive director, provided translation.

“So even as the common people are making a small incremental advancement, we see that some wealthy people are strategizing to repeal and roll back even that win,” she said. “We’ve suffered for so many years.”

But this time, when the case reached Washington’s high court, its ruling allowed the tax to stand. 

As of May, the state had raised more than triple the expected amount, with nearly $850 million collected from 3,190 payments. The first $500 million of annual revenue will go toward child care and early learning programs. The remainder will fund school construction.

Those results inspired advocates in Hawaii, one of the states where wealth tax and capital gains tax legislation was proposed this year.

“We can point to that and say, ’Look at this huge success,’” said Will Caron with Hawaiʻi Appleseed Center for Law & Economic Justice.

The tip of the iceberg

In Flores’ blue mobile home, mold stretched along the walls and ceiling. She feared it caused the respiratory problems plaguing her then 4-year-old son, Mathias.

Flores wanted to move into a single-family home with proper insulation. That, she thought, would be the end of her constant worries about mold. But the three-bedroom homes in her area cost around $200,000. 

“How am I supposed to pay when the wages are so low?” asked Flores, who was working two part-time jobs, at Firelands and a grocery store. 

Her experience is a common one. An analysis by Washington state’s Tax Structure Work Group revealed that those earning between $17,000 and $30,000 per year pay 15% of their annual incomes in Washington state and local taxes — substantially reducing their take-home pay.

By contrast, the wealthiest 10% of Washingtonians — those making at least $208,000 — pay only 3.4% of their annual incomes in state and local taxes.

Wealth inequality is growing, and “taxes are an important tool at all levels of government for pushing back against that,” said Washington Budget and Policy Center Senior Fellow Andy Nicholas. “And yet, we have a tax code that not only doesn’t push back against that, but makes it worse.”

But recent changes that make the system slightly more equitable are starting to kick in. The Working Families Tax Credit — a state version of the federal earned income tax credit — went into effect this year and offers up to $1,200 for low-to-moderate income working households in Washington. As many as 400,000 Washingtonians may receive the credit. The deadline to apply for the 2022 tax year is Dec. 31, 2023. 

The capital gains tax will increase annual state and local taxes for the wealthiest earners by half a percentage point on average, while the Working Families Tax Credit will lower the same taxes by 1.1 percentage points for the lowest earners, according to the Institute on Taxation and Economic Policy. 

Nguyễn, the Seattle-area legislator, co-sponsored a wealth tax bill in this year’s legislative session that would impose a 1% tax on individuals owning financial assets including stocks, bonds and mutual funds exceeding $250 million. Revenue would go toward education, affordable housing, disability services and a tax credit for low-to-moderate income people. 

The state’s Department of Revenue estimated that the tax would collect $3.1 billion per year beginning in 2026 from around 700 Washingtonians, some of whom are the wealthiest people in the world. 

“The main wealth-building tool of the middle class has always been our homes, and we already tax that,” state Sen. Noel Frame, a Democrat who represents Seattle, said during a March 9 Senate committee hearing. “But the main wealth-building tool of the billionaires and ultra-millionaires is financial property, and we don’t tax that at all.” 

The Seattle-based Economic Opportunity Institute worked with the Legislature to help draft the proposed tax on what’s known as “unrealized” capital gains. For the organization’s Carolyn Brotherton, wealth is an iceberg. Realized capital gains — what the state just began taxing — serve as the tip of the iceberg, while “unrealized capital gains are everything floating beneath the surface,” she said. 

The proposal has stalled in committee. 

A major claim leveled against these types of measures by the groups opposing them: People and companies will be driven out.

“A lot of businesses are leaving the state,” Lance Christensen, California Policy Center’s education policy and government affairs vice president, said in an interview with Public Integrity. The group is a State Policy Network affiliate that dismissed a California wealth-tax proposal as a “goofy” union effort. “Once they decide they can’t do business here, they’ll move to Texas, Florida, Tennessee.”

Over 30 multimillionaires and billionaires left Norway in 2022, according to local newspaper Dagens Naeringsliv, after the nation increased its existing wealth tax. 

But a growing body of U.S. research shows that while some rich people migrate out of state because of increased taxes, most stay. A recent Center on Budget and Policy Priorities report showed that lower-income households are more likely to move out of state than higher-income people across 41 states. 

“Wealthy people, like all of us, are embedded in our communities. [They] have businesses in the state, go to church, have family and communities in those specific places. Those connections root everybody, including wealthy folks,” said State Innovation Exchange’s Huelsman, who sees the “millionaire tax flight” argument as an empty threat designed to maintain an unfair tax code.

Case in point: Shortly after Massachusetts’ voters agreed to raise taxes on millionaires, the Lego Group toy company announced its plans to relocate its Americas office to the state. 

In search of the dream

Originally from Michoacan, Mexico, Flores moved to Aberdeen 17 years ago to pursue the American dream. To her, that meant access to affordable housing, health care and child care. With a more equitable tax system, Flores believed that could be possible. 

But the mother of two struggled to find affordable child care. She’s not alone. Flores’ sister quit her job at a local grocery store to avoid hiring a babysitter. Instead, she took up cleaning houses so she could bring her children with her.

For Flores, the gulf between the dream and reality was large. She walked through the mobile home park where she lived in July 2022, pointing out the signs of decay.

“I have hope,” she explained later that afternoon, over a lunch of pupusas in the Firelands office. “That’s why I’m still here.”

That summer, Flores and her family managed to buy a house — a place with no mold. A year later, her 5-year-old son Mathias is healthy and breathes easily. She now works full time as a Firelands organizer.

They are inching closer to a more comfortable life. But there’s still a long way to go. 

“When the American dream comes true is when we have equity,” Flores said.

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JACKSON, Miss. — Amia Edwards lives here because she wants to make a difference. But in this majority-Black city, long starved for funding by the state’s mostly white Legislature, that’s proved a steep challenge.

The city’s recent water crisis came after years of chronic underfunding of Jackson’s aging water infrastructure. The stench lingers in Edwards’ front yard after raw sewage flooded her home twice — neither the city nor the state agreeing to help. Abandoned homes blemish her south Jackson neighborhood as residents fled for better-funded communities. And at her nonprofit that prepares Jackson youth for performing-arts careers, she sees the results of cash-strapped schools when her kids struggle to read scripts and rap lyrics.

Then Mississippi further sliced into its revenue to fund such needs by cutting income taxes in a way that mostly benefits its wealthiest — largely white — residents.

It’s one of at least 19 legislatures that seized the opportunity to do so in the midst of budget surpluses fed by federal pandemic funding. The expected revenue hit, according to the states’ own estimates: more than $10 billion in fiscal years 2023 and 2024. That’s more than double the entire 2023 general-revenue budget for the state of West Virginia, one of the states making cuts. 

Residents of Jackson, such as Edwards, say the move to disproportionately lower what the wealthy pay in taxes will further undermine communities that suffer from disinvestment. They worry that more budget cuts will come for essential services, like public education and infrastructure maintenance. Lower-income residents, they warn, will be hurt most. 

“The wealthy tend to always look out for themselves,” Edwards said. 

Conservative groups funded by rich political donors pushed these tax cuts. It’s a well-oiled machine working to ensure that the highest earners in every state pay as little in taxes as possible.

A network that includes the American Legislative Exchange Council (known as ALEC), the State Policy Network, Americans for Prosperity and their member groups have advocated for tax-cut efforts in at least 21 states in the past two years while opposing efforts to raise taxes for the wealthy in at least eight others, according to a Center for Public Integrity investigation. Their funding sources include billionaire Charles Koch and a dark money fund used by wealthy conservatives.

The groups have it down to a science: ALEC disseminates model bills. The State Policy Network puts out research and commentary promising economic benefits. Americans for Prosperity handles on-the-ground lobbying. And in a few cases, groups in their network sue.

Mississippi House Speaker Philip Gunn, a Republican who sits on ALEC’s board, introduced that state’s income tax cuts in 2022 — something he had tried to pass before.

Mississippi’s tax structure already took a larger share of income from its poor and middle-income residents than its richest, according to an analysis by the Institute on Taxation and Economic Policy. That’s common nationwide, driven by states’ reliance on sales taxes that fall hardest on people with the least money. 

The main way to at least partially counterbalance that: income taxes with rates that increase as income does.

Gunn’s bill, which a State Policy Network member group campaigned for and ALEC lauded, would eliminate Mississippi’s graduated rates and replace them with a “flat” tax. It passed the Legislature in April 2022. Now everyone in the state pays the same income-tax rate.

And the gap between the share of income that people with the least and most money contribute to the government will worsen. According to an Institute for Taxation and Economic Policy analysis, the state’s highest-income group would receive an estimated $31,400 in tax cuts on average per year, while the lowest would get an average of $20. 

Gunn did not respond to requests for comment.

Washington state, meanwhile, has tried to ease the burden on its lower-income residents from a system that disproportionately taxes them, but the same network of conservative organizations tried to stop the effort.

Washington is one of only nine states without an income tax and heavily relies on its high sales tax to fund its government. After a decade of attempts to make the system more equitable, the Legislature in 2021 passed a tax on certain types of capital gains — the profit on sales or exchanges of assets, like stocks — over $250,000. 

The Freedom Foundation, a conservative think tank that’s part of the State Policy Network, filed a lawsuit on behalf of Washington residents to overturn the tax before the governor had even signed the measure.  

“There is a general hostility to taxation, considering it theft, which is false,” said Lisa Graves, the executive director of True North Research, a progressive corporate watchdog group. “The second component is tactical. They want to limit the power of government — state and federal — and one way is to limit their revenue to fund things like public schools.” 

ALEC, Americans for Prosperity and the Freedom Foundation did not respond to requests for comment. In blog posts, legislative testimony and other public comments about their tax efforts, the groups say that states benefit when taxes drop.

State Policy Network spokeswoman Camille Walsh said in a statement provided to Public Integrity that the group’s policy priorities include “reducing state income taxes so that there is a lower tax burden on taxpayers, while balancing other important objectives like tax environments that incentivize investment in the United States.” 

The new cuts are the latest front in a quiet financial war over taxes as a tool to consolidate wealth and power — to the detriment of lower-income Americans and people of color. The same conservative groups organized a similar campaign roughly a decade ago. 

Kansas was a high-profile example. Its 2012 legislation was designed with help from a former Reagan administration adviser on ALEC’s board of scholars, economist Arthur Laffer. Proponents of the tax cut claimed it would increase economic activity and pay for itself. Instead, the state lost hundreds of millions of dollars in revenue, slashed public spending, hurt its credit rating and eventually repealed the tax cuts. 

This year, Kansas’ Republican-led Legislature tried again, passing a flat tax like Mississippi’s that state fiscal estimates said would reduce revenue by $330 million annually. 

Americans for Prosperity and a Kansas-based State Policy Network organization were among those in favor. ALEC testified that the lesson to take from 2012 was to pair tax cuts with “appropriate spending reforms.” 

Multiple studies have found that income tax cuts, especially those that mostly benefit higher-income households, don’t have significant impacts on economic growth or unemployment, but they do increase wealth inequality.

Democratic Gov. Laura Kelly vetoed the bill.  She cited the budgetary disaster after the previous tax cuts. 

“I refuse to take us back to an era of chronically underfunded schools, four-day school weeks, crumbling roads and bridges, and crippling debt,” Kelly said in April. “That’s exactly what this bill would do.” 

Republican Kansas legislators have vowed to try again next year.

In Washington state, where the capital-gains tax survived its legal challenge, a lopsided tax structure is at the heart of inequities faced by lower-income people, said state Sen. Joe Nguyen, a Democrat who represents a Seattle-area district.

“We have so many billionaires here who have been able to build wealth and generate value because of the resources and the people in Washington state,” Nguyen said. Revenue from capital gains “is an investment in the community that helped build their businesses and that will generate economic opportunities in the future.”

‘Intolerable in any modern society’

States braced for tough economic times in 2020 when faced with the COVID-19 pandemic. But many found their coffers flush with cash in the following years. 

The surpluses were largely created by federal pandemic aid and other factors, including consumers purchasing more goods than services, helping states because the former is taxed more than the latter. 

Members of Congress thought states might use the fleeting budget boost of the stimulus aid to cut taxes, and the law is written to prevent that. But states sued. A federal appeals court ruled that the provision was unconstitutional.

This set the stage for the flurry of state income tax cuts passed in 2021, 2022 and 2023.

Reversing a tax cut is politically unpopular. So when state budgets contract, cuts to public services follow. Public education is often one of the largest cuts, as K-12 education makes up big chunks of state budgets.

Lower-income residents feel that most keenly because they don’t have the money to, for instance, seek out a private school if their children’s public schools are badly underfunded. Higher-income residents often won’t feel the same reduction in quality in their local schools — and they’re the ones getting most of the benefits from the tax cuts. 

The changes in tax policy will hit hardest in states where funding for public services already is low.

In Mississippi, households with incomes below $30,000 will receive only 7% of the savings from its tax cut despite making up more than half the state, according to an analysis by the Urban-Brookings Tax Policy Center. 

Households making more than $100,000 will get 55% of the savings, even though they’re just 12 percent of all households.  

Meanwhile, the state will likely see a $419 million reduction in revenue every year on average, according to a forecast for the next decade produced by the University Research Center, a division of Mississippi Institutions of Higher Learning that studies state and local policies.

That revenue reduction is equal to salaries for 8,700 teachers at the state’s average rates. 

Or it’s equal to state funding for childcare for more than 70,000 children.

It also is equal to almost half of what state and local officials have estimated is needed to fix Jackson’s water system.

Six months after the Legislature approved the tax cut, the NAACP and nine Jackson residents filed a Civil Rights Act complaint with the U.S. Environmental Protection Agency alleging that state decisions about water funding are discriminatory. 

“The State has repeatedly interfered with Jackson’s access to tax revenue and repeatedly reduced or blocked funds from flowing to Jackson for its water facilities,” the complaint alleged in the aftermath of a days-long shutdown of the city’s water supply. “The result is persistently unsafe and unreliable drinking water and massive gaps in the access to safe drinking water that are intolerable in any modern society.”

The EPA is investigating the complaint.

West Virginia, the second-poorest state after Mississippi, approved a more than 20% reduction in income taxes in March. The new law could phase out the individual income tax entirely over time if the state’s sales-tax revenue growth outpaces inflation.

But the state’s fiscal impact estimate projects a loss of nearly $700 million in revenue next year alone. 

That amount could pay the salaries of nearly 14,000 teachers at the state’s average rate.

The top 1% of earners in the state would receive an average tax cut of about $10,000 per year, according to an analysis by the Institute on Taxation and Economic Policy and West Virginia Center on Budget and Policy. The bottom 20% of earners, the groups say, would receive an average of $21 per year — less than the cost of a tank of gas. 

In February, as the Legislature considered the plan, Republican Gov. Jim Justice held a roundtable forum with two State Policy Network partners, Americans for Tax Reform and The Heritage Foundation, to hail the march to zero income tax. 

“That would be a flashing billboard around the country to entrepreneurs, businesses and to workers that West Virginia is open for business,” Stephen Moore, a Heritage Foundation  distinguished fellow, said during the forum. “You have a big surplus, don’t flounder. This is a magical moment for the state.”

Asked for comment, Moore said in an email that people at the bottom of the income ladder benefit the most from pro-growth policies like cutting income taxes. He said he tells State Policy Network organizations across the country that eliminating the income tax is a proven path to prosperity. 

That argument lacks context, said Richard Auxier, a senior policy associate with the Urban-Brookings Tax Policy Center.

“If you’re in Mississippi and West Virginia and you think the only difference between your states and Florida and Texas is income tax, I really think you ought to be doing a whole lot more looking,” Auxier said. “The reason you have an income tax is to shift the burden onto higher-income households. The reason to get rid of an income tax is because it can shift the burden onto lower-income households.”

The disparate impact of these income tax cuts can also be seen across racial groups. Auxier found that Arizona and Ohio’s 2021 tax cuts, for example, mostly benefited white households, while Latino households in the former state and Black households in the latter saw little to no benefit.

In Arkansas, the nation’s third-poorest state, the Legislature has lowered the personal income tax rate repeatedly, most recently in 2022 and 2023. Legislators cut the corporate income tax rate, too.

Arkansas is home to Walmart’s headquarters. The Waltons, whose family founded Walmart and are among the richest in America, contributed $1.2 million to the State Policy Network in 2021 through their foundation. The money was earmarked for “an education policy and advocacy program.” (The Walton Family Foundation is among Public Integrity’s funders, providing a grant for improving national-local news collaborations.)

One State Policy Network affiliate in Arkansas touts the income tax cuts on a list of its accomplishments. Another affiliate advocates for the state to eliminate its income tax entirely.

For some advocates in these poor states, the loss in revenue is alarming.

“We have so many other issues to deal with,” said Kyra Roby, a policy analyst with One Voice Mississippi, an advocacy group. “The state is embroiled in a welfare scandal, a health crisis in the aftermath of the Dobbs decision that originated out of Mississippi. We have one of the highest maternal mortality rates. Our rural hospitals are closing. Education is still underfunded. The residents in Jackson are still fighting for clean drinking water. But tax cuts are being pushed by outside interest groups.”

State Rep. Ronnie Crudup Jr., a Democrat who represents south Jackson in the state’s Legislature, voted against the tax cuts. He said the surplus of funds used to justify the cuts could have been put toward urgent problems.

“I just don't understand, for the life of me, why we continue to try to cut taxes when there's so many needs across this state,” he said.

Kelly Allen, executive director of the West Virginia Center on Budget and Policy, shares the same concerns in her state. Tuition for state colleges doubled over the past decade as West Virginia’s funding dropped, according to an October analysis by her group.

“Instead of further future revenue growth going to schools or infrastructure or healthcare or programs that benefit families, it will automatically be diverted to income tax cuts, which mostly benefit the state's wealthiest,” Allen said. 

Advocates of tax cuts often argue that they will attract businesses or that the money is better spent by taxpayers directly. In Mississippi, both those arguments draw skepticism. 

“If you’re not funding basic services, there’s no new businesses moving to a state where your kids can’t get an education, you can’t move your products out on the state roads and bridges, you don’t know where the closest hospital is going to be,” said Sarah Stripp, managing director of Springboard to Opportunities, a Mississippi nonprofit that works with low-income families. 

Added Nancy Loome, executive director of The Parents’ Campaign, a public school advocacy group: “You can give me money back, but I can’t hire public school teachers or pave the roads by myself. There are so many things Mississippians want that are why we pay taxes.”

‘The No. 1 issue’

The 2010 midterm elections saw a wave of conservative wins across the country. Republican-controlled states — where the party held the governor’s seat and both houses of the legislature — jumped from nine to 21. 

The following year brought a slew of similar proposals across these states to weaken unions and collective bargaining power, scale back access to abortion and voting rights, expand the ability to buy and carry guns and lower taxes on wealthy people and businesses, as documented by Alexander Hertel-Fernandez of Columbia University in his book, “State Capture.”

Many of these bills were largely identical. They were introduced and passed with unusual speed. And it was thanks to the trifecta of ALEC, the State Policy Network and Americans for Prosperity. 

ALEC, which first launched in the 1970s, is a network of conservative state legislators, philanthropies, wealthy donors, advocacy groups and private-sector businesses that drafts and disseminates “model bill” proposals for state legislation.

The State Policy Network is made up of state-level conservative, pro-business think tanks that produce reports, media commentary and testimony, often on behalf of bills that ALEC drafts.

Americans for Prosperity, the newest of the three organizations, was created and directed by the Koch brothers’ political network. It conducts electoral work and policy lobbying at both the state and federal level.

Financial disclosures show that donors to these organizations, in addition to the Walton Family Foundation and Charles Koch Foundation, include the foundation for the Coors family of Coors beer fame; the Sarah Scaife Foundation, started with money from Pennsylvania’s wealthy Mellon family; the Roe Foundation, whose businessman founder was an adviser to President Ronald Reagan and started the State Policy Network; and the Thomas W. Smith Foundation, a major funder of the anti-critical race theory movement.

But many of the people underwriting these groups’ efforts are anonymous. They send their money through DonorsTrust, which shows up as the contributor instead.

That obscures who’s benefiting from the tax cuts that their donations — tax deductible in the case of the State Policy Network and ALEC — helped bring about.

In 2021 alone, DonorsTrust funneled around $48 million to the State Policy Network and its affiliates and partners, including ALEC and Americans for Prosperity, according to the organization’s latest financial disclosures. On its website, DonorsTrust describes its donors as “conservative- and libertarian-minded.”

“We help streamline our givers’ charitable wishes and don’t comment on the specific policy positions of the organizations our accountholders recommend grants to,” said Lawson Bader, president and CEO of DonorsTrust, said in an emailed statement. “That said, our givers are ideologically diverse and over the years have directed their giving to more than 1,100 unique charities, some of which approach the tax-policy debate from different perspectives.”

A 2019 investigation by the Center for Public Integrity and USA TODAY found that Mississippi’s Legislature introduced more ALEC model legislation than any other state in the country.

“I don’t understand the state thinking the way they think,” said Credell Calhoun, a Democratic supervisor of the county where Jackson is predominantly located, which he said struggles to get state funds to fix roads and bridges. “But I think it’s coming from the national Republicans, pushing, pushing down here to cut taxes.” 

Usually business groups are reliable supporters of such a move. But in a 2022 report detailing the concerns of local business leaders, the state’s chamber of commerce wrote that “the Mississippi tax environment was not high profile nor ever discussed significantly as a priority.”

ALEC's 2022 annual report credits ALEC legislators for helping to dump graduated income tax rates in five states. A State Policy Network member, the Goldwater Institute, describes itself as having helped write Arizona’s 2021 tax-cut law. In nearly every state with a recent income tax reduction that benefited the state’s wealthiest households, these groups or their affiliates were there, promoting these policies.

“This is the No. 1 issue that we’ve heard from Utahns all over the state, and the No. 1 concern is that they’re feeling the pinch in their pocketbooks with inflation at all time highs,” Heather Andrews, Utah state director for Americans for Prosperity, said at a hearing last year for a tax-cut bill.

The legislation passed. She urged Utah to cut even more.

And this year it did, with a law the state estimated would reduce revenue by $475 million next year ⁠— the equivalent of average salaries for nearly 8,000 Utah teachers.  

“Utah does more with less,” Andrews said in her testimony for this year’s bill, “and that’s what we do.”  

‘ALEC puppet state’

The atmosphere was somber as people who advocate for policies that benefit lower-income households gathered in a modest, chilly conference room at a Homewood Suites in Jackson in March.

Advocates, local politicians and service providers bustled in and out, grabbing lunch and talking about taxes while keeping an eye on other legislative proposals in the waning days of the session. 

Further tax cuts had been floated in Mississippi this year but didn’t make it through.

Even so, they know more will come.

A provision in the 2022 tax law requires the Legislature to revisit by 2026 a proposal to eliminate the income tax entirely. Everyone in the room worried about funding for education, housing, infrastructure and other public goods their communities rely on.

Roby, with One Voice Mississippi, laid out two potential policy solutions: raise taxes on the wealthy to bring in more revenue or enact tax credits aimed at lower-income households to make the state’s tax system less reliant on money from poor people.

Both seem unlikely in the state’s current political climate. For now, Roby said to the people around the conference table, her primary goal is to stave off more cuts.

Alicia Netterville, principal at Acclivity Group and former deputy director of ACLU Mississippi, listened and then turned the conversation to a basic right underpinning every other policy: “Your vote is your currency.” State decisions would look different, she said, if every Black person in Mississippi could vote and participate in state government equally to white people.

Overall voter turnout in the 2020 presidential election in Mississippi was about 60%, sixth worst in the country. Registering to vote here is more difficult than in almost any other state, Public Integrity found as part of a 2022 review of voting access. The state employs most of the tactics traditionally used to keep Black people from voting or thwart their influence in government, including felony disenfranchisement, racial gerrymandering and strict photo ID requirements at the polls.

“You have to pay to play in Mississippi, and that leaves out a lot of people,” Netterville said.

Among the groups pushing restrictions that suppress voting across the country: ALEC and the State Policy Network.

Such restrictions can help state officials enact or ignore policies without worrying as much about the breadth of support for the ideas.

A Mississippi Today/Siena College poll in January, for instance, found that cutting the state’s grocery tax, which most impacts lower-income households, is more popular than eliminating the state’s income tax. 

Mississippi’s grocery tax is the nation’s highest. Most states don’t have one.

“You know, I will argue all day that we're an ALEC puppet state,” Stripp, with Springboard to Opportunities, said at the March meeting. “I think the hardest part of this argument is that the Mississippi Legislature is not accountable to the people of Mississippi. How do we as people of Mississippi push them forward when it's hard to make them accountable to their actual citizens?”

The post State tax systems contribute to inequality. These states are doubling down. appeared first on Center for Public Integrity.

In the past year, the Supreme Court has made several decisions that have radically reshaped essential rights for Americans spanning from abortion access to gun rights to the separation of church and state. 

The higher court rulings have prompted an array of analyses of how some of these decisions will disproportionately impact some already marginalized groups – like how gutting affirmative action could sharply decrease Black and Latino student enrollment in colleges and overturning abortion rights will especially hurt Black women. A recent article published in the American University Law Review urges readers to also focus on how these decisions, and others pending before the Supreme Court, could affect another marginalized group: people with disabilities. 

The article, “The Disability Docket” — co-authored by University of Pennsylvania professors Jasmine Harris and Karen Tani as well as Shira Wakschlag, senior director of legal advocacy and general counsel of The Arc of the United States — applies a “disability lens” to the Supreme Court’s 2021 and 2022 terms to show how these decisions could have far-reaching implications for marginalized communities. 

And it goes deep into how decisions that aren’t specifically considered disability cases, Dobbs v. Jackson Women’s Health Organization and West Virginia v. Environmental Protection Agency, may disproportionately impact people with disabilities. 

But it also delves into how some cases that focus more on disability rights — and are pending before the court — may have broader civil rights impact. One case is Acheson Hotels, LLC v. Laufer for which the court will review the “tester” standing to challenge a hotel’s failure to provide accessibility information on its website, even if the tester never intended to stay at the hotel. Testers act as investigators, where someone voluntarily will put themselves in a situation to experience discrimination for the purpose of a legal challenge. The outcome of that case can have broader impacts on the use of testers in other civil rights cases, like fair housing.

The authors also explore the historical context behind the legal decisions regarding the rights of people with disabilities and other marginalized groups. These decisions, they say, have always been intertwined. The authors also provide advice to litigators and advocates who may find themselves arguing disability cases before this Supreme Court.  

The Center for Public Integrity spoke with two of the papers’ authors, Harris and Tani, to learn more about their findings and why it is important to apply this “disability lens” to the country’s current legal landscape.

This conversation has been edited for length and clarity. 

Q: Why was it important to undergo this study of how decisions made by this Supreme Court would impact people with disabilities in particular?

Harris: Disability is an often forgotten piece of the court’s docket and often neglected in terms of how it operates, and that’s reflective of how disability is in society as well. We have differential treatments for people with disabilities, and sometimes that’s warranted, and at other times it’s not. … At all corners of both society and law, you have this sense that disability is different and ought to be treated differently. 

Tani: Disability cases do really important work for the law. Their reach is broader than disability. But my sense is – and I think the sense of other people – is that those decisions tend to get kind of under-appreciated or not recognized at the time. And so the actual significance, the legal significance of those decisions has gone under appreciated.

I think part of the impetus for wanting to do this kind of Supreme Court roundup with the disability throughline was just to say, historically, there’s a pattern here of these cases actually being in some sense much more significant and far reaching, but because they’re labeled like a disability case, they’re not kind of as hot button. They’re not as sexy. They’re considered sort of in that silo. And so the idea, I think was to kind of like, carry that insight forward and see how cases more recent cases might fit that pattern.

Harris: Look, more than 61 million adults in the United States – that’s just adults – have one or more disabilities. And that’s before COVID. We haven’t had the post-COVID numbers with long haulers included in there. Disability is more pervasive than we think, and so if we see disability as touching many more things, places and people than it already does then applying a disability lens becomes even more important. 

Q:   What are some examples of “non-disability” cases heard by this Supreme Court that impact people with disabilities?

Tani: There are these big cases where they’re going to affect people with disabilities, and that effect has just not been part of the conversation. So I think our insights with both — Dobbs and West Virginia vs. the EPA — is to say, look this has a really particular and potentially severe impact on certain people with disabilities. And let’s kind of surface that as well. 

For the West Virginia vs. the EPA case, we drew on some great evidence, by other folks, about the way that people with disabilities are just disproportionately impacted by climate disasters and other disasters for various reasons, some of which have to do with underlying vulnerability and economic precarity. 

Harris: For people with disabilities, abortion has always been part of healthcare. It’s always been something that’s been talked about, not only from an individual body standpoint that [pregnancy will result in the body] taking on more stressors that create or exacerbate disabilities, but also in terms of reproductive options and choices more broadly. It’s also for people with disabilities who want to become parents, and the kind of struggle that has been around that, and that dates back to eugenics.

With respect to Dobbs, you have situations where it’s already really hard for people with disabilities to travel right independently. Now they have to cross state lines in order to get abortion care that makes it disproportionately difficult.

And so that kind of insight in terms of thinking about the ways in which these cases have compounded effects, when you think about intersectionality, it’s going to affect poor disabled Black and Brown women. That’s who’s going to be disproportionately affected and harmed the most. You have to look at Mississippi, where the rates of disability are incredibly high. The rates of poverty are high, and it’s Black and Brown people in those situations, and when you see all of that together it gives you a different picture of what the discrimination looks like and how it’s operating.

Q: Why is it important for everyone interested in civil rights to be paying attention to the outcome of some disability cases pending before the court?

Tani: Like it or not, the statutes are sort of tethered together. Your lawmakers have basically patterned one after the other, such that, you know, they’re kind of traveling together in the law. So you really do have to pay attention. 

Harris: There’s a sense in which the lack of publicity was a good thing at one point, because the disability rights movement started heavily based on white men. And it was really veterans who had connections with Congress. So there was a way in which that allowed the foundation of the law to push through very quickly in ways that the public didn’t get a chance to understand what this law was going to do and what disability discrimination looked like. 

When something goes wrong in the Supreme Court, the popular retort is, well, you’ve got Congress, so you can go to Congress, and you can vote and your vote matters. I think this is a particularly difficult issue for people with disabilities, because voting and voting rights and access to the vote has been so constrained over time and continues to be [constrained].

How will people with disabilities be able to actually have their voices heard and remedy the harm that comes out of this court?

Tani: I mean, one last thing that I’ll say is that there are disability civil rights cases with the potential to have vast implications for other civil rights laws. The Acheson case is about tester standing and testers are important, not just in the [Americans with Disabilities Act] context, but also the race and fair housing context. It’s an obvious example of where there could be spillover to other contexts. 

Q: What is some of the advice you have for attorneys and advocates bringing disability cases before this Supreme Court?

Tani: Strategy is really important before this court because they could make bad laws. We tried to call attention to some times when you’ll be asked a bad question for the court to decide and you just have to mobilize to change public opinion.

If this case is really going to be that bad, how can we get it off the docket anticipating what the court might do?

The post ‘Disability is an often forgotten piece of the court’s docket’ appeared first on Center for Public Integrity.

The ability of millions of Americans to make ends meet hinges on how we measure poverty.

But the “how” may shift after a national panel recommended changes to one of the Census Bureau’s poverty measures.

Designing a fair and accurate measure is no simple matter. It’s also surprisingly political because it drives public policy and government spending, including who gets access to help such as the Supplemental Nutrition Assistance Program. 

“There’s two main uses for poverty measures,” said Indivar Dutta-Gupta, executive director of the Center for Law and Social Poverty. “One is determining eligibility for programs or benefits or tax credits. The other is just to paint a portrait of the actual income deprivation that families face throughout the country.”

Some of the debate boils down to which of the Census Bureau’s two poverty yardsticks is more appropriate for determining who qualifies for government aid: the Official Poverty Measure or the Supplemental Poverty Measure. 

The country’s Official Poverty Measure was developed in the 1960s, based solely on a family’s ability to purchase food. The supplemental, with data first released in 2011, uses a standard of living based on expenditures that include food, clothing, shelter and utilities, compared against a household’s post-tax income, which accounts for government aid and the Earned Income Tax Credit.

It’s rare for the two measures to go in different directions — but recently they have.

The poverty rate under the Official Poverty Measure grew from an estimated 10.5% to 11.6% of the population between 2019 and 2021, the Census Bureau reported last year. In contrast, the rate under the Supplemental Poverty Measure decreased from 11.8% to 7.8%. 

One of the main reasons: stimulus payments from the government to households during the COVID-19 pandemic, which helped raise many households’ incomes temporarily. 

That’s the backdrop to a new National Academy of Sciences panel report, requested by the Census Bureau, that recommends the agency make the Supplemental Poverty Measure its official yardstick and incorporate several updates to it. 

Unlike the Official Poverty Measure, whose methodology has remained largely unchanged since its inception, the Supplemental Poverty Measure was designed to evolve with the changing demands of society. 

The panel was tasked by the Census Bureau to see if the supplemental measure, or SPM,  “was adequately measuring the economic needs of disadvantaged households in the country,” said James Ziliak, professor of economics and director of the Center for Poverty Research at the University of Kentucky, who chaired the panel.

“The SPM has a long and sound conceptual basis but itself is imperfect and should be continuously improved,” said Dutta-Gupta, who was also on the panel. “The hope is to get a more accurate portrait of poverty in the United States.”

Medical care — and specifically health insurance — should be included when considering a basic-needs bundle for a household, the panel found. 

The panel also determined that child care has become a large and rapidly growing portion of families’ out-of-pocket spending.

“Every child needs care, and we’re spending significant resources for households to meet that care,” said Ziliak.

The panel also suggested ways  for the Census Bureau to better capture housing costs, generally the largest component of a household’s spending. 

Perhaps most significantly, the panel felt that this measure should no longer be considered “supplemental” but be elevated to be the “Principal Poverty Measure” and used as the “nation’s headline poverty statistic.” 

That could have big ripple effects. The Official Poverty Measure — or a close variation — is used by nearly two dozen government agencies to determine eligibility for federal programs, according to the panel’s report.

There’s wide recognition that the current official measure’s income thresholds for poverty are far below what families need to sustain themselves. Many agencies try to account for that with their program eligibility limits: The USDA sets the maximum income to qualify for the Women, Infants and Children nutrition program at 185% of the Official Poverty Measure thresholds, for instance.  

“There is a desire to have an absolute measure of poverty,” said Gregory Acs, vice president for income and benefits policy at the Urban Institute, who was not on the panel. That’s what the Official Poverty Measure is meant to do, “but that misses the point. What food a family needs to buy and what constitutes a healthy diet has changed over time — and what you need to participate in society has changed.” 

The panel suggested continuing to use the current Official Poverty Measure — though perhaps renaming it the Basic Poverty Measure or Basic Income Poverty Measure — to maintain data on historical poverty trends and as an alternative yardstick for program eligibility.

The panel’s recommendations sparked some political pushback. U.S. Sen. Marco Rubio, a Florida Republican, sent a letter to the Census Bureau that expressed concern over the potential impacts.

The report, Rubio wrote, “recommends a sweeping set of changes that would prevent our government from accurately measuring poverty and would instead advance progressive political priorities. The authors of this report have not only overstepped their commission, but have also broken a sacred trust long defining the relationship between research experts and policymakers.” 

“Poverty measures, in other words, are not purely technical instruments,” he added. “They signal a national consensus about the goals of our economy and system of government.”

In addition to criticizing the panel’s recommendation to elevate the Supplemental Poverty Measure, Rubio disagreed with the suggestions to include other variables in the calculation, like childcare and health insurance. 

A May study from a right-leaning think tank, the American Enterprise Institute, determined that several federal programs — including food assistance — would expand to cover families making more money if the Supplemental Poverty Measure was broadly used to determine program eligibility. That would come with a multi-billion-dollar price tag, the study concluded.

The Official Poverty Measure has long been criticized by experts across the political spectrum, but many say it still serves a purpose.

“For program eligibility at the household level, you want a straightforward measure that’s not hard for people to document or produce lots of paperwork for sources of income,” Dutta-Gupta said. “If you made that measure too complex for program eligibility, then families struggling would have to figure out if they need to get their housing assistance before food assistance and other things that would be highly undesirable.”

Ziliak said it would be a huge administrative undertaking for the federal government to change eligibility rules for so many programs. The Official Poverty Measure also offers historical trends and data going much further back than the supplemental measure. 

“Official poverty gives us a consistent long history,” said Liana Fox, assistant division chief for economic characteristics at the Census Bureau. “SPM allows us to study the impact of government programs on reducing poverty.” 

Others have said that neither of these measures are adequate for determining who is most disadvantaged economically, but have suggested that a consumption-based measure, rather than an income-based measure, would be better.

The debate over the National Academy of Sciences panel’s suggestions shows just how subjective defining poverty is. And it underscores the importance of that definition for households struggling to cover basic costs of living.

“I think it’s important for people to understand how we measure poverty so they understand how public policy and macroeconomic conditions impact poverty,” Dutta-Gupta said. “Large changes [in poverty] are entirely because of the economy or public policy changes. It has shockingly little to do with people’s individual choices.” 

But all of these measures have been facing new challenges over the past decade. Survey responses involved in these data collection efforts are decreasing as people regularly screen phone calls from unknown numbers and answer their doors less — and some communities have long been hard to reach. To address this, the Census Bureau is trying to use other data, including administrative information from programs like Social Security.

“But that data is often terrible at identifying some identities, like race, and don’t perfectly align with the poverty measures,” Dutta-Gupta said of the administrative data. “I would note that in general, the worst data quality is often from people who are struggling the most.”

The Census Bureau’s Fox said that any changes implemented to the Supplemental Poverty Measure would take years to implement. 

An interagency working group will be vetting the report’s recommendations. Once that’s done, there will be a multiyear process for public engagement. 

Fox said the agency’s priority is to be transparent.

Acs thinks it’s important not to lose sight of the people that the poverty rate encompasses as we weigh these changes.

“We measure poverty because there are people who have such limited resources that they cannot make ends meet,” Acs said. “They cannot fully participate in society. They are so resource-deprived that it is a threat to their health and wellbeing.”

The post Why the way we measure poverty matters appeared first on Center for Public Integrity.

It started with a formal apology.

“California Native American peoples suffered violence, discrimination and exploitation sanctioned by state government throughout its history,” California Gov. Gavin Newsom said in a 2019 statement. “We can never undo the wrongs inflicted on the peoples who have lived on this land that we now call California since time immemorial, but we can work together to build bridges, tell the truth about our past and begin to heal deep wounds.”

With that came an executive order to establish the California Truth and Healing Council  for Native Americans “to clarify the record — and provide their historical perspective — on the troubled relationship between tribes and the state.”

The council’s work could set an example for the rest of the country.

There have been similar efforts internationally, in Canada, Australia and New Zealand. In the U.S., the Maine Wabanaki-State Truth and Reconciliation Commission examined harmful events relating to Wabanaki children and the Indian Child Welfare Act. There have also been instances of local governments giving land back to tribes.

But the California council, whose work is now underway, appears to be the first in the U.S. where a state is comprehensively looking to make reparations for the damage caused to its Indigenous communities. 

The council is made up of 12 individuals from both federally and state-recognized tribes across California. Council members were nominated by tribes, but ultimately appointed by the state. There are more than 109 federally recognized tribes in California — and dozens more that are only state-recognized — so not every tribe has direct representation. 

By 2025, the council must submit a report to the governor’s office that documents the full history of harm caused by the state. It will also make policy recommendations about reparations — which in this case may include land back and other ways to preserve California Native cultures — for past harm and prevention of further damage.

“We wanted to create a mechanism for tribes to be able to drive where the conversation was going,” said Christina Snider, Newsom’s tribal affairs secretary and a member of the Dry Creek Rancheria Band of Pomo Indians.

There have been similar efforts internationally, in Canada, Australia and New Zealand, but the council appears to be the first in the U.S. where a state is comprehensively looking to make reparations for the damage caused to its Indigenous communities. A similar panel was established in Maine in 2012, the Maine Wabanaki-State Truth and Reconciliation Commission, but it explicitly examined harmful events relating to Wabanaki children and the Indian Child Welfare Act. There have also been instances of local governments giving land back to tribes.

“We’re hopeful that giving Native people and tribes the time to think about what they really want from this process, what they want as a meaningful outcome, will be reflected in recommendations that are thoughtful and diverse and take equity into account,” Snider said.

She hopes to call private and federal partners to the table to work on solutions together once the final report is done. It would also fill huge gaps in many non-Indigenous Californians’ understanding of Native peoples’ history in the state, she said.

More than two years into the council’s listening sessions, interviews and research throughout the state, several issues have emerged, Snider said. 

“A major theme here has been the idea of California Indian identity,” she said. “California Native people aren’t seeing themselves in the stories that are being told about Native people in general. Then their identity isn’t being translated into policy changes, either.”

The need for elder care, housing and mental health services have also come up frequently, Snider said. But there are also acute generational divides created in many communities by urbanization, boarding schools and other policies that separated Native families. 

The council has also heard a lot of feedback around land — something Newsom’s administration is suggesting policies to address. In 2022, the state started providing funding to some tribes to co-manage parts of the coast.

Currently, Snider said, “there’s almost no access to land ownership and no access to places that are spiritually significant and where people have lived since time immemorial.”

Kouslaa Kessler-Mata, a University of San Francisco associate professor and a member of the Truth and Healing Council and the Yak Tityu Tityu Northern Chumash and Yokut tribes, sees important work underway. But the infrequent meetings of the council and shortage of resources make her feel less empowered as a council member.

“I’m concerned about how the structure of the council is set up almost to position us as puppets,” Kessler-Mata said. “We’re not central to the process. We’re just there to help signify that something is happening, which is unfortunate.”

The council was set up through the state’s executive branch, rather than the legislature, where wide support and consensus is needed to pass initiatives. That means it has a more limited budget of only about $450,000 per year through the fiscal year ending in 2025,  an annual amount roughly a third of what the legislature-established California Reparations Task Force for African Americans said it needed this year just for consultants to help with their work. The Truth and Healing Council also has fewer contracted researchers and staffers at the state dedicated to assisting the completion of its report when compared to the Reparations Task Force, Kessler-Mata said. 

“A budget is a moral document,” Kessler-Mata said. “That absence of funding has serious consequential results in our work. We can’t achieve our objectives in a really thorough way without additional support.”

Snider said that creating the council through the executive branch meant it started faster and had more flexibility in its structure, developed after consultation with tribes. The result is that tribal leaders have more say in the process than they might otherwise, she said.

Some of the most important healing work from the process, Kessler-Mata said, has come through a partnership between the council and the Decolonizing Wealth Project, an Indigenous and Black-led organization that supports reparatory justice initiatives across the country. 

In February, the Decolonizing Wealth Project awarded grants to 13 tribes and Indigenous organizations in California to help with initiatives aimed at healing and changing narratives about their history. The grants will help tribes collect oral histories, provide travel stipends for members to go to Truth and Healing Council meetings, fund work documenting impacts around boarding schools and more.

“When we heard this effort was happening in California, we knew it was important to support,” said Carlos Rojas Alvarez, director of executive affairs and strategic initiatives at the Decolonizing Wealth Project. 

Alvarez said there has been a push for a federal commission to examine the full impacts of Native American boarding schools. Between 1819 and 1969, hundreds of thousands of Native American children were taken or coerced away from their families and tribes, forced to attend government-sanctioned Indian boarding schools. Among the consequences: loss of language and culture, abuse, trauma and permanent separation of many children from their families. Alvarez said he hopes the California effort will help drive momentum to address the boarding school history and related issues in other states and by the federal government.

The grants also help address a big challenge for the council: California Indians are a diverse group with different histories and needs.

“One Native person’s story in California is not the same as anyone else’s,” Snider said. “Each person has a different story, perspective and idea for what they need to make them whole.”

Some tribes involved in the process aren’t federally recognized, for example. And each tribe is a sovereign political entity. Kessler-Mata said she is one of the few council members who isn’t a tribal leader, which she feels is important because she doesn’t have a stake in any tribe’s enrollment battle or other political issues. Her goal is to stay focused on what the state can do “to advance the rights of individual Indians.”

Another challenge, Kessler-Mata said, is capturing a precise picture of the experience of California Indians. Most data on Native Americans in California is about all Native Americans who live in the state, regardless of whether they are members of a California tribe.

While the council’s final report won’t be finished until 2025, Kessler-Mata has early priorities. She wants to see the state start collecting data on California Indians to measure indicators like homeownership rates, impacts from climate change, educational outcomes and treatment in the criminal justice system. She also says the state needs to provide greater equity in funding for California Indians.

“What we really need is a multi-sector approach for people to understand what has happened and what is happening,” Kessler-Mata said. “The Golden State was created at the cost of someone else. That implicates everyone.”

The post Pondering state reparations for tribes, a council documents history of harms appeared first on Center for Public Integrity.

As discussions about reparations for Black Americans gain some ground, the first state with a task force on the issue is hearing that it needs to think bigger.

African Americans in California have been telling the state’s reparations task force that a one-time payout would mean little if they don’t have equal access to education, employment, health care or housing. A payment, they said, wouldn’t stop the over-policing of their neighborhoods or the disproportionate Black Californians in the state’s prison system. 

“We’re due reparations — what we want is wealth,” said Malcome Morgan, who also goes by Malcolme Muttaqee, a San Diego resident and organizer with Pillars of the Community and the California Black Power Network, during the task force’s most recent meeting in the city. “Good health, generational wealth, knowledge in the form of good quality education. A payout is a good place to start, but it’s not the definition of true wealth.”

Indeed, the vast majority of recommendations by the state task force appointed to study and develop reparations proposals for African Americans will likely look beyond just monetary compensation to address the lasting harms of slavery and systemic racism, according to task force members.

“Reparations is more than financial compensation,” California Assemblymember Reggie Jones-Sawyer, who sits on the task force, said in an interview. “Financial compensation will have an inertia that is immediate. The other things that we’re looking at will have generational change.”

Better educational opportunities, major reform to the criminal justice system, and policies to address political disenfranchisement, housing inequities and health disparities are among the systemic changes the task force expects to recommend.

The United Nations has outlined five conditions that must be met for full reparations. Compensation is just one of them. 

The other are assurances that harm won’t be repeated, rehabilitation like medical or psychological care, satisfaction that can include formal apologies for the damage done and reversing the wrongful acts. 

“The check won’t solve everything because of how the system is made to drain Black wealth, whether it be through taxes, liens, police systemically pulling people over, insurance companies, health debt,” said Kwesi Chappin, reparations program director for the Decolonizing Wealth Project, which supports reparatory justice initiatives across the country. “The government must address those harms — not just with a check, but how do you change the system so Black folks are able to have a tangible better life?”

Ending modern-day slavery

One of the things the task force hopes to push is the end of a type of modern-day slavery within the state’s prison system: forced prison labor.

California’s Constitution, like many states, outlaws slavery and involuntary servitude “except as a punishment for crime.” In 2022, the California Legislative Black Caucus tried to remove this language but couldn’t get enough votes in the state Senate. 

One of the task force’s draft proposals calls for closing 10 prisons in the state and using the savings to support a new state agency, a Freedmen’s Bureau, which would oversee and monitor any future reparations legislation as well as process reparations claims. 

“The message of slavery is within the public safety realm,” said Jones-Sawyer. “That’s why it has to be put into reparations.”

Mass incarceration is one of the five categories of harm inflicted on African Americans by the state of California, according to the task force. It seemed top of mind for many members of the public attending the task force’s last meeting.

“Here I am, in my 30s, and I was enslaved by the California Department of Corrections,” Muttaqee said. “We see generational trauma via mass incarceration, chattel slavery. You know, to-may-to, to-mah-to.”

A check, Muttaqee said later in an interview, isn’t “going to change the overpolicing of people who get reparations.”

Other speakers relived the moments when they or their relatives were profiled or abused by police.

“These issues are ecospheric in nature,” said Task Force Chair Kamilah Moore in an interview. “If you lived in an environment that was overpoliced, what did that do to your mental health? To your economic position?”

Task force member Lisa Holder presented a proposal to include in the recommendations policies that make the criminal legal system more equitable.

“Again, reparations is not just about a check,” Holder said during the January meeting. “It’s about rehabilitating these systems that have exacted a tremendous amount of harm against Black people. We have to change these systems.”

One of the reforms that Holder suggested is strengthening the provisions of the California Racial Justice Act, which allows individuals to challenge racial bias in criminal charges, convictions and sentences. Holder recommended changes to the law’s uniformity and better data collection to increase prosecutorial transparency. She also proposed creating a Racial Justice Act Commission to track, audit, monitor and analyze that data, focusing on racial profiling in the prosecution of cases. 

But amid all the talk of ending mass incarceration and reforming the criminal justice system, African Americans incarcerated in California’s prisons are largely cut off from the task force’s work. Khansa Jones-Muhammed, co-chair of the Los Angeles chapter of the National Assembly of American Slavery Descendants and a member of Los Angeles’ Reparations Advisory Commission, said that needed to change.

“Inmates do not have access to these hearings,” Jones-Muhammed told task force members. “There have been no efforts to provide inmates with an email or physical mailing address to provide public comment to this body. Inmates cannot access state websites.”

Task force members acknowledged that this was a shortcoming that they wanted to try to address in the few months they had left before presenting their final recommendations.

Moore said of the thousands of public emails the task force has received, only one has come from someone who is incarcerated. He wanted assistance with a DNA test to see if he was eligible for reparations. In partnership with a community organization, Moore recently visited Lancaster State Prison and was able to speak with some people there about the reparations work. But all the commissioners want to get more input from incarcerated Californians. 

“I’m currently thinking through how to do that,” Moore said. “Hopefully we’re able to get a critical mass of engagement from incarcerated people.”
Jones-Muhammed bringing that up “was like an aha moment,” Jones-Sawyer said. He noted that he had an upcoming visit to Donovan State Prison related to his work as a legislator and would ask about reparations while there.

A new wave of the reparations movement

The state’s task force was created by 2020 legislation authored by now-Secretary of State Shirley Weber. In June, the task force issued an interim report detailing the harm inflicted on African Americans by the government. It divided these harms into five categories: housing discrimination, mass incarceration, unjust property seizures, the devaluation of Black businesses and unequal health care.

The group’s final report, due later this year, will include recommendations for the state’s legislators to carry out if they so choose. 

Weber said that when she put forth the bill to start these reparation efforts in 2020, she knew the state had a legislature that would support the effort and that California had the resources to accomplish it.

“If we can demonstrate, which we can and we have, that racism and slavery existed in California, all the way from the Mason-Dixon line on the East Coast … it proves that this issue is systemic and across the nation,” Weber said at the task force’s most recent meeting. “It’s not just confined to slave states. The damage is across the nation.”

The state’s task force isn’t the first attempt at reparations in the country. But it’s the broadest of any current effort — and across the nation, people are watching.

Chappin said the scope of California’s reparations task force work is beyond anything proposed before it. He hopes the federal government and other states and localities will look to California as a model.

Evanston, Illinois, became the first U.S. city in 2021 to make reparations available for Black residents, but the effort was more limited, offering housing grants.

In January U.S. Sen. Cory Booker, a Democrat from New Jersey, reintroduced federal reparations legislation that would establish a commission to consider reparations proposals for African American descendants of slavery. Similar bills have been introduced in Congress over the last three decades without success.

In December, the Boston City Council voted to form a task force to study reparations and other forms of atonement to Black residents for the city’s role in slavery and its legacy of inequality. Public officials in Asheville, North Carolina, New York state and several other places around the country are also creating commissions to work on reparations.

“California just skimmed the surface,” Chappin said. “They only had a couple of years and did a lot. I’m now looking at the federal government, at President Biden.”

The post True reparations aren’t limited to money appeared first on Center for Public Integrity.

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OSAGE NATION — On a crisp November morning, Teresa Bates Rutherford gazed at the construction site of her future home — her mind on her tax struggle with the state of Oklahoma.

The trust land she is building on has passed down through generations of her family on the Osage Reservation, located in northeastern Oklahoma. The state and county have limited jurisdiction on her land — a protection that should extend to taxes, but too often doesn’t.

Rutherford knows the tax laws better than most. She sits on the Osage Nation’s Tax Commission Board. Every month, she and two other Osage women pore over tax records for the tribe. Many of those records deal with the state, she says, which always wants more tax revenue.

For instance, Oklahoma makes vendors charge Rutherford state sales taxes on the materials for her home until she can provide them with proof that she qualifies for a tax exemption. There are no instructions available to apply for the exemption, she said, and she doesn’t know yet if the state will approve her request. She suspects most Osage citizens aren’t even aware they don’t have to pay these taxes.

“There’s always problems with taxation and the state,” said Rutherford, who has long dreamed of building this home for herself and her daughters. “The state just cannot accept us as a sovereign nation.”

An investigation by the Center for Public Integrity in partnership with ICT (formerly Indian Country Today) found that many state and local governments infringe on tribal nations’ taxing authority, siphoning billions of dollars in tax revenue from reservations over the past few decades alone.

It’s a modern version of wealth extraction, treating tribes as lesser entities whose sovereignty can be ignored. And it reduces the money tribal governments can spend on services in their communities, where poverty rates are often higher than in surrounding areas. 

After enduring centuries of stolen land and seized resources, many tribes have been seeking economic recovery through commercial ventures. Tax policies are a major obstacle to further progress, tribal leaders say.

“Quite simply, we are asking for parity in the federal tax code and to be treated as other sovereigns in this country as reflected in the U.S. Constitution and numerous federal laws, treaties and federal court decisions,” said Mashantucket Pequot Chairman Rodney Butler during 2020 congressional testimony. “Without question, tax parity for tribal governments will allow for greater self-determination, economic growth and self-sufficiency for Indian Country.”

States are not allowed to tax economic interactions between tribal citizens and their governments. But courts have protected states’ ability to tax most economic interactions between tribal-run entities and non-tribal companies or individuals, precisely where most of the revenue opportunities lie. 

Imagine if California made this demand of Nevada: When our residents visit, you have to charge our sales tax on their purchases and hand it over to us.

That’s effectively what states and counties do to tribal governments, and not only with sales taxes.

No national estimates exist for the total amount tribes have lost due to these tax policies. But court cases, reports and interviews with tribal leaders, attorneys and advocates compiled by the Center for Public Integrity and ICT show the scope is at least in the hundreds of millions of dollars each year. For instance:

• Since 2008, North Dakota has collected more than $2.5 billion in tax revenue from the oil and gas industry on the Fort Berthold Reservation, according to Mandan, Hidatsa and Arikara Nation Chairman Mark Fox. 
  
• A recently settled lawsuit in Washington said the state was collecting more than $40 million annually in various taxes from a shopping center the Tulalip Tribes built to help generate revenue for the tribal government. The state and county collected another $20 million in taxes on the Tulalip Reservation in 2015 that was not disputed in the lawsuit.
  
• In 2019, courts upheld Riverside County’s right to collect $23 million in annual tax revenue from non-tribal entities or people leasing trust lands from the Agua Caliente Band of Cahuilla Indians in California.
  
• Montana collected more than $347 million from taxes on alcohol, tobacco and fuel sales and natural-resource development on reservations statewide in 2016. The state sent less than $11 million of that to tribal governments.
  
• California and San Diego County collect more than $400,000 in property taxes every year from a wind-power project on the Campo Indian Reservation. The state also took $4 million in sales taxes when the turbines were installed. 

When states and counties tax non-tribal businesses and customers on reservations, tribal governments face a thorny decision: Do they add their own taxes on top, which can drive economic activity away because it increases costs? Or do they forgo that, losing a source of critical revenue needed for government operations? 

Unequal burden

The way governments choose to tax can help blunt fast-rising inequality. Instead, tax policies often make it worse.

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Many tribes have either not imposed their own taxes or reduced what they were charging, according to interviews with tribal leaders and records reviewed by Public Integrity and ICT. Some entered revenue-sharing agreements, often with the state or local government taking at least half of the tax revenue earned on tribal lands.

These outcomes largely keep tribal governments from using tax policy to attract business development in ways that cities, counties and states routinely tap. 

And many tribal leaders say states, after collecting taxes from tribal economic activity, provide minimal services that benefit tribal citizens on reservations.

“It’s a real inhibitor of economic opportunity,” said Robert Odawi Porter, former president of the Seneca Nation and managing principal of the Capitol Hill Policy Group, a government relations firm that works with tribes. “The tribal government should have the same right to determine its tax policies as a state, local and federal government.”

The backdrop to this dynamic: Nearly all states tax in ways that take a greater share of income from people with less money and a lesser share from people with more. That increases economic inequality while reducing the revenue that states can collect, a Public Integrity investigation found. 

Several states said they collaborate with tribal governments on taxation, though they gave little detail on the services they provide on reservations in exchange for the taxes they collect.

“New Mexico has made a concerted effort in recent years to work as cooperatively as possible on taxation issues with tribal governments in recognition of their sovereignty,” Charlie Moore, spokesman for the state’s Department of Taxation and Revenue, said by email.

Mike Nowatzki, a spokesman for North Dakota Gov. Doug Burgum, said by email that the administration works with tribes “to avoid a patchwork of taxation that might discourage economic development.”

Oklahoma officials did not respond to requests for comment.

In lawsuits about the matter, many states argue that they should be collecting tax revenue from economic activity on tribal lands because they provide services off-reservation — such as highways — that the customers and companies involved in on-reservation businesses need.

The U.S. Department of the Interior, the primary agency carrying out the United States’ obligation to protect tribal rights and assets, and to which tribes have turned to urge action on the taxation issue, declined to comment. Its reasoning: It didn’t “have anything to add on this.”

Looking to tribes for ‘free money’

Tribal nations — and their lands — possess immunity from taxation by the U.S. and state governments.

Hundreds of treaties state this. So does the U.S. Constitution, which put it this way: “Indians not taxed.” 

“It has been litigated and debated for many, many years as to what those words mean,” said Gabe Galanda of the Round Valley Indian Tribes of California and managing lawyer at Galanda Broadman, an Indigenous rights law firm in Seattle, Washington. “I just know that sitting here today, you know, 200 or more years from when that law was written, that unless you have clear indication in federal statute or treaty that what is being sought to be taxed should not be taxed, it more than likely will be taxed.”

The shift first began after the Indian Citizenship Act of 1924. Federal courts concluded that because Native people were now U.S. citizens, they had to pay federal income taxes.  

There was no concurrent effort by the U.S. government to restore land and resource wealth stripped from most tribes after the continent was colonized. 

“A lot of us feel strongly that we paid our taxes through the land that we ceded,” said Henry Cagey, councilmember and former chairman of the Lummi Nation. “Why do we as Indian people have to pay taxes to the United States when the land that we gave up is their tax base? The property taxes, the business taxes, all the income that they generate and run their government is based on the land we ceded.”

The development of tribal enterprises got a boost in the 1970s in part from federal programs, grants and loans. 

That’s when state tax collectors came calling.

“Unfortunately, cash-strapped states continued to look at on-reservation resources and activity as potential ‘free money’ and subsequent cases proved disastrous,” Gavin Clarkson of the Choctaw Nation, who served as deputy assistant secretary for Indian Affairs at the Interior Department during the Trump administration, wrote in a 2020 Federal Lawyer article.

As states tried taxing tribal economic interactions with non-tribal customers or companies, federal judges gave them the greenlight to keep doing it.

In a 1976 case, the U.S. Supreme Court ruled that states could tax cigarette sales to non-Native customers on reservations and upheld a state of Montana requirement that tribes keep records of such sales, reasoning that these requirements amounted to a “minimal burden.” The court noted that tribal citizens were also Montana citizens, voting in local elections and benefiting from state-funded services like roads and schools.

In 1989, the Supreme Court decided in Cotton Petroleum Corp. v. New Mexico that states could charge their taxes on non-tribal businesses operating on reservations. In its majority opinion, the Supreme Court found that the state provided “substantial services … that justify the tax” — pointing in part to services off the reservation — and said the tax “imposes no economic burden on the Tribe.”

Tribes with resources to sue have challenged these tax policies. But federal judges — only seven of which in the country’s history have been Native American — often favor states.

An October 2022 ruling by the 8th Circuit Court of Appeals is among the most recent, finding that South Dakota could impose its excise tax on work performed by a non-tribal contractor hired by the Flandreau Santee Sioux Tribe for a renovation and expansion of its casino and hotel.

“In these cases, the argument is often that the issue is really about a tax avoidance or scheme, rather than the economic development of tribes and how they’re using their revenues,” said F. Michael Willis, a non-Native attorney with Hobbs Straus Dean & Walker, who works with tribal councils on these types of cases. “But tribes use these economic development programs to generate revenue for their citizens. Tribes are coming up with any models they can to generate revenue to overcome a history of hundreds of years of asset deprivation in their communities.”

State gets taxes, the tribe gets the bill

One after another in the last decade, oil and gas companies operating on Ute Mountain Ute lands in the Four Corners region have declared bankruptcy.

“They abandon their pollution,” said Peter Ortego, general counsel for the Ute Mountain Ute. “They abandon their machines and pumps and everything else they have on the reservation, and they basically wash their hands and say, ‘We’re done with it.’”

The subsequent cleanups that fall to the tribe have added to a list of needs that leaders there must address. Ortego said they would have more resources to deal with these issues if New Mexico weren’t taking more than $1 million in state taxes from oil and gas operators on Ute Mountain Ute lands every year. 

“The tribe is kind of struggling to get the funds and everything to clean that up,” Ortego said. 

In 2009, the Ute Mountain Ute sued New Mexico over five taxes the state was imposing on oil and gas operators on the reservation, including a severance tax generally intended to help mitigate damages caused by extraction.

The tribe said that the state had no right to collect this money and was inflicting an economic burden on its people. 

The state argued that the tribe and the oil and gas producers it contracted with didn’t operate in an economic silo.

“The activity conducted on the reservation by the nontribal taxpayers is simply the first step in the creation of profits for the taxpayers and royalties and taxes for the Tribe,” the state’s attorneys wrote in a brief. “The subsequent steps take place off the reservation, in New Mexico. The producers take full advantage of the infrastructure made possible by New Mexico law.”

Texas could say the same of oil and gas activity that starts in New Mexico and crosses state lines. But if a company refines New Mexico oil in Texas, Texas couldn’t tax the operator for the extraction that happened elsewhere.

Nearly 40% of the roughly 2,000 Ute Mountain Ute lived below the poverty line at the time, court documents noted. The per-capita income of tribal members was $8,159 during the previous decennial census, approximately half the average for residents in neighboring counties, and the unemployment rate among tribal members was around 11%, far higher than the surrounding counties.

The tribal government tries to help its members by providing payments every year. According to court documents filed by the tribe, if the New Mexico taxes were found unlawful, the tribe would collect an additional $1.3 million in severance taxes annually and all of that money would go to its members — an extra $650 per person each year. 

A district court agreed that the state didn’t have the right to take those taxes. But the 10th Circuit Court of Appeals reversed that decision in 2011. 

In a dissent to the majority ruling, 10th Circuit Judge Carlos F. Lucero noted the additional $650 per tribal member would be “no small sum for a tribe whose yearly per capita income is a scant $8,159.”

New Mexico still collects those taxes. 

That court ruling came before the rash of oil-company bankruptcies. Today, one in four Ute Mountain Ute Reservation residents live in poverty and, accounting for inflation, per-capita income hasn’t improved.

Moore, with the New Mexico Department of Taxation and Revenue, said by email that the state cannot share the tax revenue with the Ute Mountain Ute without legislative action.

A portion of all severance tax revenues in the state is used to finance bonds for capital projects, and 4.5% of that bonding capacity is earmarked for tribal infrastructure, Moore said. The state also offers at least two tax credits to oil and gas producers who operate on tribal lands to soften the impact of double taxation on the companies.

In Fort Berthold, North Dakota, which provides more than 2% of the country’s domestic oil production, the MHA Nation faces a similar issue. Since 2008, the state has collected more than $2.5 billion in tax revenue from oil and gas production on the reservation, according to the tribe.

“As far as I’m concerned, that creates a shortfall,” said Fox. 

Between 2008 and 2013, the tribe got only one-third of the revenue. That’s gone up since, with the current agreement resulting in the tribe keeping roughly 60% over the past couple of years.

On average each year, the MHA Nation collects about $100 million in royalties from oil and gas producers and an additional $250 to $350 million in taxes. Roughly 90% of the royalties go toward providing health care and health insurance for its people, both on and off reservation, and cash distributions for every citizen. The oil and gas tax revenue, Fox said, funds the regulation and mitigation of drilling and other necessities such as roads and schools. 

But the tribe still faces major budget and infrastructure deficits.

In 2020 alone, the nation needed $1.6 billion for road construction and maintenance, according to congressional testimony Fox gave that year. 

With a population increase on the reservation has come a dire need for housing — Fox estimated costs of more than $1.1 billion for new and rebuilt homes required between now and 2030.

Asked how much of the tax revenue collected from the reservation goes toward services and infrastructure there, North Dakota Deputy Tax Commissioner Sandy McMerty replied by email, “Dollars collected from the varied tax types go to fund a variety of government and local services that impact all citizens of North Dakota.”

Fox said in an interview that not being able to collect the full tax revenue earned on the reservation keeps the MHA Nation — and many tribes — dependent on federal funding to meet many of their needs. 

“As long as we depend on the federal government, we’ll never build ourselves out of this social economic poverty,” Fox said.

‘You’re taking tax revenue’

When the Tulalip Tribes sued Washington state and Snohomish County in 2015 over taxes, the federal government intervened — on behalf of the tribes. 

At issue was more than $40 million the state and county were collecting annually from the tribes’ Quil Ceda Village shopping center while leaving the Tulalip with the bill for typical government functions.

The Tulalip invested approximately $153 million in physical infrastructure to support commerce, including roads, freshwater and sewage treatments, electrical lines, highway interchanges and a fiber telecommunication system.

The county, meanwhile, didn’t provide business licensing or inspections, building permitting or code enforcement, land use planning, roads or road maintenance, animal control services, or fire marshal services with the disputed tax revenue, according to the plaintiffs. Nor did the state provide, for example, food, health, and safety inspections, drinking water regulation and monitoring, or environmental permitting that it typically handles elsewhere. 

The plaintiffs said Quil Ceda Village visitors, businesses and employees rely entirely on the Tulalip and the United States for all that.

“We, of course, said, ‘Hey, wait a second, you’re taking tax revenue that’s generated within our own city, within our own boundaries, and it’s not even coming back to make improvements,’” said Cameron Reyes, property manager for the Consolidated Bureau of Quil Ceda Village.

Of the few services the state does provide there, “virtually none of them are funded by the disputed taxes,” the tribes’ counsel noted in its post-trial brief.

Federal lawyers in their intervening complaint wrote that the state and county taxes “completely preclude Tulalip and the Village from imposing and enforcing their own like tribal taxes, and deprive the Tribe of the tax base that other sovereigns use to fund important government activities.” 

“The State and County provide extensive government services benefitting the non-Indian taxpayers in return for the taxes collected,” wrote the defendants in their post-trial brief. They cited clean air and education as examples.

One of the state and county’s other arguments was that the tribes didn’t appear to need the additional tax revenue because, in constructing infrastructure for a resort, casino and shopping center, the Tulalip had expenses more like a “typical developer” than a government.

“No such argument could succeed against a non-tribal sovereign,” the plaintiffs responded in their post-trial brief. “The Tulalip people, with the support of the United States, have fought against overwhelming odds to reclaim a measure of the economic self-sufficiency that was their historical trademark.” 

After a five-year legal battle, the parties settled. Under a revenue-sharing agreement, the Tulalip will get $500,000 of the sales tax going to the state each year until the 2023-to-2025 state budget cycle. At that point, the tribes can receive half of all the sales tax receipts — but only if they have obtained a site and permits for a $35 million facility to address mental health and addiction.  

Not all tribes have the resources to take states to court, said Rutherford, the Osage tax commissioner in Oklahoma.

“Anytime we try to tax, they want to come in and say, ‘Well, a share of that belongs to us,’” she said.

She gave the example of the Osage Nation’s tobacco compact with the state. It dictates that Oklahoma is due half the taxes from non-Native customers on tobacco in smoke shops owned by tribal citizens on reservation land. 

“They don’t go to the other side of the hand and say, ‘Well, we should consider that all Natives who buy cigarettes from QuikTrip or Love’s, that portion should go back to the tribes.’ They never offer that,” Rutherford said. “No, that’s not even mentioned.”

Of the half-share of sales taxes the Osage reservation collects, the Osage Nation government keeps 30% and returns the remainder to the smoke shop owners.

“They put tribes between a rock and a hard place, knowing that litigation is going to take a lot of money if the tribe wants to fight it,” Rutherford said. “So, unfortunately tribes end up having to do these compacts that are not fair.”

A tax war and ongoing negotiations

Hundreds of protestors from the Seneca Nation took to the streets in the summer of 1992. A court had just ruled that the state of New York could impose its sales tax on non-Natives who bought gas and cigarettes on reservations.

The court ruling meant the state could collect an estimated $50 million annually from tribes. For the Seneca, it was a blow to their sovereignty.

The tax war — as it was referred to at the time by the Seneca and news outlets — escalated to violence after New York sent state troopers to stop the protestors. Both Seneca protestors and troopers were injured. For about a week state troopers commandeered the highway near the reservation, stopping and questioning drivers who sought to enter it.

The clash ended when the state agreed to defer collection of the taxes as the issue made its way through appeals. The Seneca have maintained their right to choose how to tax cigarettes since, opting to not tax them.

“We fought hard, our men, women, elderly and young, to preserve our immunity from any external taxation,” said Porter, the former Seneca president.

Some tribes have worked out tax agreements that they’re happy with — sometimes after legal pressure.

“I grew up being told that we had a lot of issues with the state, but there’s not a whole lot you could do about it because we had no way to fight back,” said Bo Mazzetti, chair of the Rincon Band of Luiseño Indians in San Diego, California. Then the tribe was able to open a casino, providing revenue to hire attorneys. 

Under the current agreement with the state, the Rincon Band keeps all sales taxes paid by both tribal and non-tribal members, charging the same tax rate as the state and county.

“We’re not a political subdivision of the state,” Mazzetti said. “Anything generated in the reservation should stay on the reservation in terms of taxation.”

California still gets something out of it. The tribe pays the employer share of payroll taxes for employees working in its gaming operations, hotel and other ventures. The band’s revenue also helps fund services that non-tribal residents on and off the reservation benefit from, including a fire department that helps respond to wildfires in the region. 

The tribe’s gaming operations provide jobs to tribal citizens and non-citizens alike, Mazzetti said, all of whom spend money outside the reservation, generating tax revenue for the county and state.

Indeed, studies from other states, including Oklahoma and Washington, show that tribal ventures help tribal and non-tribal economies around them.

“We’re not talking about the state losing out on the economic benefit of these dollars,” Porter said. “No tribe has a truly self-sustaining economy. The revenues are going to get taxed by the state anyway as the dollars get spent off-reservation. The way I view it is, ‘Please, can’t the Indians just touch the money once?’”

Washington state has the best gaming compacts, according to Sammy Mabe, councilman for the Suquamish Tribe. The now largely positive relationship between Washington and the Suquamish took time and work to build.

“My biggest advice to people is be open-minded, to dialogue with the non-Native counterparts, because it’s real easy to hold grudges and let historical trauma get in the way of progress,” Mabe said. “But if you’re not working with the state that you’re in, and fighting for your sovereignty but also fighting for collaboration, then you’re always going to run against opposition.”

Litigating these tax disputes “results in ‘winners’ and ‘losers,’” Washington State Department of Revenue spokesman Mikhail Carpenter said in an email, whereas negotiated compacts can mean wins for both parties. 

“Historically compacts are proven tools in settling disputes between the Tribes and the state on complicated issues,” Carpenter said. “Tribal Nations are recognized as separate sovereigns from states, and their rights and actions must be respected and balanced with the state’s own rights and actions.”

After a 2016 report from Harvard University and the University of Arizona found that the system of state taxation on reservations was “deeply flawed,” the Interior Department began gathering feedback on whether to change the federal law on trade with tribes. That effort appears to have stalled. 

“A clear statement by the Secretary of the Interior is necessary to preempt concurrent state taxation of Indian commerce in Indian country,” the director of the National Indian Gaming Association wrote in support of the proposal at the time. A U.S. Treasury Department advisory committee made up of tribal leaders also urged the federal government in 2020 to fix the taxation issue.

Porter now advocates in Washington, D.C., for fixes to double taxation. He thinks he needs more data to show that states will benefit fiscally from additional tribal economic activity without encroaching on tribal taxing authority.

Some tribes take the stance that Congress has the power to give them absolute tax immunity, undoing the impact of court decisions to the contrary. A simpler tweak by Congress that could help counteract state taxation: Give all tribal citizens credits for any federal income tax they pay.

“There’s not a huge amount of income taxes going from Indian Country to the federal government,” Porter said. “But for a family to save $5,000 a year is a huge amount of money that could affect what you could do for your children. Every dollar really counts, and it can’t be said enough.”

Thousands of tax protests

The biggest unresolved tax fight between a state and tribes is playing out in Oklahoma. The U.S. Supreme Court ruled in 2020 that the state must recognize several tribes in eastern Oklahoma and their reservation territory, which the state said were disestablished at its conception.

McGirt v. Oklahoma had to do with criminal jurisdiction, but the repercussions spilled into taxation for the Cherokee, Chickasaw, Choctaw, Muscogee and Seminole nations, whose reservations were reaffirmed by the ruling. The state has been collecting income taxes from tribal citizens who earned income on tribal lands involved in the McGirt case.

A 2020 report from the office of the executive director for the Oklahoma Tax Commission estimated that if these regions are considered Indian Country for taxing purposes, it could reduce state income tax collections by nearly $73 million per year and state sales and use tax collections by about $132 million annually.

Since the ruling, the state has faced thousands of administrative tax appeals and requests for exemptions, only some of which have moved to more formal hearings, the Oklahoman reported.

But in October, the Oklahoma Tax Commission ruled that it can keep collecting these taxes from citizens of the tribes in eastern Oklahoma despite McGirt. Commissioners said that the McGirt ruling did not expand to tax jurisdiction and noted that the 2020 report was published by a former executive director without their review or approval. 

“This results in millions of dollars of overpayment by tribal citizens who are unlawfully subjected to Oklahoma income taxes,” Stacy Leeds of the Cherokee Nation, who teaches federal Indian law at Arizona State University, wrote in her own protest to the state over her income taxes. “This over-taxation occurs, in large part, because Oklahoma knowingly misrepresents the law.”

The state tax commission and governor’s office did not answer questions about the impact of McGirt on taxes or Rutherford’s unrelated battle over sales taxes with the state, which is still ongoing.

In 1906, the U.S. government divided the Osage Reservation into 2,229 parcels of land, one for each Osage citizen. Rutherford is building her home on her family’s original allotment. 

The land is in restricted status, the federal government holding it in trust to protect it for Rutherford. But she still has to prove that she can build on the land without the state intruding.

She submitted documents to the state to apply for an exemption for sales and use tax that would cover supplies for her new home. Now she is waiting to see whether she’ll be reimbursed for the taxes she already paid the state and exempted from taxes on future materials she’ll need as she moves forward with construction.

Since she is a restricted Osage landowner, she said, all the purchases she made for that new home should be free from state taxes.

“There are laws to back that up,” Rutherford said. “The state does have the right to tax in certain situations, but not this one. But as you know, Oklahoma doesn’t give that up very easily.”

Maya Srikrishnan is an investigative reporter with the Center for Public Integrity. Shannon Shaw Duty, Osage, is the editor of the Osage News. Joaqlin Estus, Tlingit, is a national correspondent for ICT.

Clarification, Dec. 27, 2022: One sentence was changed to make clear that the Osage Nation’s tobacco compact with Oklahoma dictates how taxes are split on certain tobacco sales, not on non-tobacco purchases. 

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SAN DIEGO — William Keith has experienced homelessness on and off here for the last 20 years.

His latest struggle came at the start of the pandemic. Keith had a federal housing voucher that guaranteed his rent to landlords. But as a Black man, the 66-year-old veteran said, it felt much harder to find housing than for white veterans he knew using the same program.

“Property managers immediately showed me a lot of racial animosity,” Keith said. “They didn’t even want to show me the apartments.”

A concerted national effort has helped reduce the number of veterans experiencing homelessness, said Jack Tsai, research director for the VA’s National Center on Homelessness Among Veterans. That number has been halved since 2010, according to the federal homeless census.

But Black veterans remain overrepresented among that population, a reflection of long-standing discrimination that impacts everything from the racial wealth gap to the ability to find a job. Black people made up around 12% of active-duty military personnel in 2018, but 33% of the homeless veteran population.

Federal programs reducing veteran homelessness fall short in addressing some of the factors that increase housing instability for Black veterans and those from other marginalized communities, such as Native Americans. Black veterans often faced racial discrimination and bias during service, then experience disparities in receiving VA benefits and other social services afterward.  

On top of that, Black people who join the military are more likely to arrive at a financial disadvantage, said Shawn Deadwiler, founder of Mission Uplift, an organization to help Black homeless veterans.

“Let’s take me, for example,” said Deadwiler, who grew up in Arizona. “All I saw growing up was violence. I had to fight to get to school every day, to get food every day, to get home from school every day. My deck was stacked against me from day one. I joined the military because I didn’t want to live in the poverty that I was living in.”

Keith, meanwhile, joined the Army in 1974, during a time when he could serve in the military to avoid incarceration. He was honorably discharged.

Systemic discrimination

Although the military is increasingly diverse, its leadership is  largely white. The reasons Black enlistees face more obstacles in promotions include historical segregation in the military, lack of mentorship, opportunities to be promoted and racism.

Non-white service members are also disproportionately disciplined. A 2019 Government Accountability Office report found Black and Latino service members across the armed forces are more likely than white service members to be investigated, receive nonjudicial punishments or be court-martialed. Veterans with dishonorable discharges don’t have access to the same VA benefits.

Upon leaving the military, Black veterans face many of the same issues that make all veterans more at risk for homelessness. But housing affordability issues affect them more acutely because of the country’s long history of housing discrimination, said Stephen Metraux, a homelessness researcher at the University of Delaware.

In an expensive market, like San Diego, people with housing vouchers often struggle to get landlords to rent to them. That challenge is even greater when the voucher holders have a criminal record, are unemployed or face racial discrimination. 

Metraux said leaving an institution like the military also is a substantial adjustment that most people get through with the support of family. But veterans without a network able to help them and knowledge about resources may face greater struggles that could increase their risk of homelessness.

Kathryn Monet, the CEO of the National Coalition for Veteran Homelessness, said Black veterans may be more likely to have family and friends who aren’t in a financial position to support them when they fall on hard times.

The Department of Veteran Affairs offers many resources to veterans, effectively social welfare programs that can help increase their access to health care, education and housing. And indeed, they do make a difference. Black veterans have higher levels of income than Black civilians. They are less likely to be incarcerated.

But they’re still more impoverished than white veterans and more likely to end up homeless.

The benefits provided by the VA may not be enough to combat generations of racism faced by many Black veterans. There are also disparities in accessing certain VA benefits: Black veterans are more likely to have their disability claims denied than any other racial or ethnic group. 

Black veterans were also excluded from benefiting from the 1944 GI Bill in the same way white veterans did — something Congress is only just now considering fixing.

“Even when you put these social welfare benefits in place, at the end of the day you still see disparities,” said Richard Brookshire, co-founder of the Black Veterans Project, a group trying to address racial inequities among veterans.

Tsai, Metraux and Deadwiler said more work is needed to ensure veterans can access their benefits.

During the annual homeless census counts, Deadwiler said, those capturing the data should also ask what benefits and programs homeless veterans are using. That could help them connect with resources they are eligible for but may not be accessing.

Deadwiler and Monet said that more could be done during off-boarding from the military to ensure that veterans have a place to live upon leaving.  

“Nobody is really out there asking every service member as they transition, ‘Hey, do you have somewhere to go?’” Monet said.

Brookshire and Monet also said that there could be more targeted solutions for Black veterans’ unique needs. For example, Monet pointed to recent efforts to help homeless veterans who live on reservations, where previously housing vouchers couldn’t be used. Now the VA and HUD are working with tribal governments to build housing for veterans or to help veterans find places to live in already-built units.

Monet said there are also efforts underway to get VA programs expanded beyond veterans who had honorable or general discharge.

Deadwiler said he has been urging members of Congress to push some of these solutions for Black veterans forward, but he hasn’t seen movement toward a solution yet. 

“There needs to be more cultural competency in helping Black veterans,” Brookshire said. “There’s wide room for bias and exploitation, and the victims of that are often Black.”

Keith was eventually able to find housing in May 2021 after more than a year of searching with his voucher. He’s been writing to his local congressman and filing complaints with the VA about his experience.

“We’re not just talking about housing,” he said. “We’re talking about disabilities. About education. The institutionalized, systemic racism runs deep.”

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ABERDEEN, Wash. — As she opened her $1,600 property tax bill in February, Edith Baltazar suddenly lost her appetite for the eggs she’d prepared for lunch with her daughter. Her thoughts raced: Would their home be taken away if she couldn’t pay it? 

Baltazar’s daughter wept. The family would have to make a difficult decision: the property tax or $2,000 for diabetes medication. 

The taxes won. 

“Sometimes you have to choose — pay your property taxes instead of paying your water bill and everything else,” said Baltazar, recalling the stressful experience in a July interview.

The lowest-earning residents in Washington state, where Baltazar lives, pay almost 18% of their annual incomes in state and local taxes, while the wealthiest chip in 3%. 

All but a handful of states make poor residents contribute a greater share of their income to taxes than wealthy people do. Economists call that upside-down approach “regressive.” Nationwide, the share the lowest-income earners pay to state and local taxes is 54% higher than what the top earners pay, according to the Institute on Taxation and Economic Policy. 

And those policies hit communities of color the hardest. 

Undocumented immigrants contribute billions of dollars in state and local taxes, according to estimates by ITEP and other groups, but aren’t eligible for many tax-funded services or tax rebates. Studies show assessors tend to inflate property tax assessments of low-priced properties, disproportionately owned by Black and Latino people. The higher tax bills increase the odds of what Baltazar feared — losing your home.

All this means state and local tax systems that could help address America’s widening economic inequality are instead making the problem worse.

The federal system also increases inequality, with legal loopholes giving very high-net-worth people massive tax breaks. But the Internal Revenue Service doesn’t force low-income residents to shoulder the biggest relative burden. Most states do.

“We’re asking people to fund government programs even when they can’t afford basic needs, like food and shelter,” Ariel Jurow Kleiman, an associate professor at Loyola Law School in Los Angeles who focuses on tax law and policy, said via email. “That strikes me as profoundly unfair.”

A key reason: sales and other consumption taxes. Unlike the federal government, almost all states collect them. Spend $50 on clothes for your kid, and you’ll pay the same sales tax as anyone else in your area, regardless of income. The poorer you are, the greater the share of your resources the sales tax gobbles up.

income tax is the main tool states have to counteract that. But some choose to tax everyone at the same rate, rather than following the federal model of increasing up the income scale. 

And some states, like Washington, don’t tax income at all. These places lean especially heavily on sales tax and other revenue options that make lower-income people contribute more.

How a state chooses to collect money impacts not only who pays more but also how much revenue it generates to fund public services. Poor people handing over a higher percentage of their income in taxes and fees to fund state and local services often end up with less in return. That’s often the case with school funding. 

In a 2018 study, ITEP found that tax structures vary widely even in states with similar costs of living and demographic makeup. The organization ranked Washington state as having the most regressive tax system in the nation, for instance, while judging neighboring Oregon’s system as one of the most equitable.

With no state income tax, Washington’s average state and local sales taxes of more than 9% are among the nation’s highest. This is what Baltazar faces every day. When the time came to pay the first installment of her property taxes, there was no flexibility left in the family’s budget. 

Baltazar, her husband Rafael and adult daughter Kary had all lost their full-time jobs and couldn’t get unemployment benefits. Her husband, who found occasional work on a farm, went without insulin for three months so they could pay the property tax. They relied on home remedies such as hibiscus tea as well as a small supply of the diabetes pill metformin to manage his Type 2 diabetes instead. He developed a painful stomach ulcer that caused him to stop working altogether. 

There’s no mystery about how states can make their tax systems more equitable, policy analysts say.

“A progressive income tax with multiple rates that go up the higher the income is very boring and it’s not new, but it’s really the only way,” said Richard Auxier, a senior policy associate with the Urban-Brookings Tax Policy Center. 

But making that change won’t be easy. Some states have gone to extra lengths to ensure efforts to tax poor people less and rich people more end in failure.

Some of the most regressive state tax policies today originated during the Reconstruction era that followed the Civil War, when Southern state governments had to start building schools and providing other government-funded services to formerly enslaved people. 

Tax rates nearly doubled in the South between 1860 and 1870. According to a 2019 National Bureau of Economic Research paper, white Southerners violently resisted changes to the tax code that could redistribute wealth built from slavery, organizing to intimidate Black politicians. Larger tax revenues in areas “were strongly correlated with an increased likelihood of a violent attack against black policymakers,” economics scholar Trevon D. Logan found.

Ultimately this led to the adoption of tax policies that favored whites. In 1890, Mississippi adopted a new constitution with a provision to require three-fifths majority votes to pass most tax increases, guaranteeing that white legislators could block such changes even if they were in the minority. In 1901, Alabama adopted a new constitution with caps on property taxes, which limited the amount of money white homeowners would have to contribute to fund Black public schools. 

One of the Mississippi delegates, Marye Dabney, wrote a few years later that the major goal of the 1890 constitution was to “effectually remove from the sphere of politics in the State the ignorant and unpatriotic negro.”

State tax code can’t be divorced from the “racist, sexist, classist” laws and practices that prevent large groups of people from building wealth, said Andy Nicholas, senior fellow at the Washington State Budget & Policy Center. 

When Washington state was still a territory in 1864, the government levied a tax on Chinese adults to deter migrant workers from settling in the area. That was repealed five years later.

In the early 1930s, a coalition of urban workers and rural farmers in the state helped pass a ballot initiative to reduce property taxes and create a personal income tax with rates increasing up the income scale. The Washington Supreme Court threw it out in 1933, saying it violated the state’s constitution. 

“It definitely took away a tool that could have been there, and it forced lawmakers to rely on consumption taxes,” said Nicholas. The state’s tax system hasn’t changed much since. 

At the other end of the continuum is Oregon, which has an income tax with rates that rise as earnings do and is one of five states without a sales tax.  

Whenever he gives talks on tax policy, Juan Carlos Ordóñez at the Oregon Center for Public Policy points to his neighboring state as an example of what not to do. 

The “situation in Washington is diametrically opposed and much worse for low-income folks,” he said. 

Still, Ordóñez said, Oregon’s tax structure is considered only “mildly progressive.” 

Oregon has a tax rebate known as “the kicker,” approved by voters in 1980 to kick money back to taxpayers when revenue tops projections by at least 2%. This year, the richest 1% of residents received a $17,000 rebate. The lowest-earning 20% of Oregonians averaged $30. 

An anti-tax movement prompted overhauls of the state’s system in the 1990s, capping property taxes and making it harder to pass bills for raising revenue. 

The state’s wave of tax provisions that largely benefit people with more means — disproportionately white — were part of a nationwide trend that gained steam beginning in the 1970s. 

“After the victories of the civil rights movement, there’s this backlash to the public sector that’s motivated, certainly in part, by racism,” Ordóñez said. “We’re sort of stuck with suffering the consequences of those decisions and the misguided policy that sees public investments in a very detrimental way.” 

Ballot measures and legislative action aren’t the only explanations for regressive systems. Courts play a role, too. 

In Pennsylvania, judges have consistently interpreted the 1870s uniformity clause in the state’s constitution, that “all taxes shall be uniform, upon the same class of subjects,” in a narrow way that saves wealthier people money at low-income taxpayers’ expense. 

The clause was a reaction to legislative favoritism of railroads and big businesses in the 19th century. But it ultimately stopped the state from creating a graduated income tax like the federal government. Instead, Pennsylvania has a flat rate, said Frances Beckley, an educator at Temple University law school’s Center for Tax Law and Public Policy. It also taxes commercial real estate at the same level as residential.

Forty-eight states have uniformity clauses in their constitutions regarding state and local taxes, according to The Pew Charitable Trusts. Few are bound by court decisions like Pennsylvania’s. 

“Those legal interpretations which do not flow necessarily from the language of the constitution, but are now very well established in Pennsylvania law, put real limits on doing anything progressive in terms of taxes,” Beckley said.

The federal government used to rely on customs duties, a cousin of sales tax. The Sixteenth Amendment in 1913 added income taxes, at first only on the wealthiest people. When the country needed more money to fund war efforts, it increased those rates on high earners. 

“Part of the reason the federal tax system got so progressive was a historical accident of the income tax coming in at the right time,” said Lawrence Zelenak, a professor at Duke University School of Law.

In 2005, then President George W. Bush tapped experts to recommend federal tax code reforms. One change they advised against: replacing the income tax with a federal sales tax. The burden, the panel concluded, would fall on lower and middle-income Americans the most. 

Total federal taxes for a lower-income single mother with one child would increase more than eightfold from $723 to $6,186 under such a system, the U.S. Department of Treasury estimated at the time. A national sales tax policy was never adopted.

But by then, nearly all states relied on sales taxes.

The first, Mississippi, adopted it amid the mass unemployment of the Great Depression. Mississippi Gov. Mike Conner, who was later described in a Time magazine article as “solidly foursquare for white supremacy,” wanted to turn around a huge budget deficit while also reducing property taxes.

The beneficiaries — property owners — were overwhelmingly white. Overall taxes increased for Black families, who were less likely to own property. 

Louisiana, which created its first sales tax several years later in 1938, today has the nation’s highest combined state and local sales tax rate at 9.55%, according to the Tax Foundation. Its poverty rate, meanwhile, is 50% higher than the national average.

The state’s heavy reliance on sales tax revenue exacerbates the wealth gap between white and Black families, according to a 2021 report by the Louisiana Budget Project that used ITEP data. Mostly because of sales tax, Black households there pay the highest share of income on taxes, while white households pay the lowest, the study found. 

“Make no mistake, Louisiana’s lower-income communities and communities of color are subsidizing lower taxes for rich households and corporations through our high sales tax rates,” said Neva Butkus, state policy analyst at ITEP.

The difficulties that high sales taxes cause low-income families aren’t just financial. A mother in Alabama was recently reported to the state’s Department of Human Resources, which includes Child Protective Services, for not sending diapers to daycare when she couldn’t afford them, said Lindsay Gray, executive director of nonprofit diaper bank Bundles of Hope in Birmingham. 

Birmingham’s combined state and local sales taxes are even higher than Louisiana’s average. People who aren’t financially strapped might think the nearly $5 of sales tax on top of $50 of diapers isn’t much, “but it really impacts a family in a huge way,” Gray said.  

“When families literally have $0, that $5 over and over again really adds up and really can be devastating,” she said. “Every single quarter and dollar counts when families live in poverty.”  

Delaware, one of the few states without sales tax, manages it by collecting an unusually high share of its revenue from fees associated with headquartering a company in the state. That’s driven by its reputation as an especially business-friendly tax haven.

It makes Delaware a rarity with mildly progressive taxes overall, but at the expense of other states’ revenue. The companies that would otherwise have paid them corporate taxes get to avoid it with a Delaware address.

The state, meanwhile, has lowered income taxes on top earners over time. Its top rate is half as high as its pre-1985 level. And it starts taxing low-income residents once they cross the $2,000 threshold, much lower than where federal taxes kick in.

State Rep. John Kowalko said his efforts to increase the rate for the wealthiest residents and lower taxes on the poorest died in committee, victims of a political ideology that favors low taxes and minimal scrutiny of corporate behavior as a means of encouraging businesses to set up shop in the state.

“They’d say, ‘You have this many businesses in your district,’” Kowalko said of those arguing against changing the state’s tax structure. “They also conveniently leave out, ‘You also have 20,000 people that pay your taxes at an unfair rate.’”

State and local governments have two main tools to make taxes more equitable, said Loyola Law School’s Jurow Kleiman: reducing the taxes low-income people pay through more progressive income tax structures and transferring money through programs and rebates, such as state versions of the federal earned income tax credit. 

“It’s all part of the higher cost of being poor,” Jurow Kleiman said of taxation that hits low-income people harder. “But in the case of taxes it’s a cost imposed consciously and intentionally by governments, which in theory means there’s something we can do about it relatively easily.”

Thirty-four states as well as Washington, D.C., and Puerto Rico have such tax credits, though most are small. Some are nonrefundable, meaning that people can’t get back more than what they owe in taxes. Jurow Kleiman said refundable credits are more equitable policies, because they can act as cash transfers to households that are too poor to owe high income taxes.

Many rebates also include carve-outs that limit eligibility, Jurow Kleiman said. Some programs are only for seniors or don’t allow childless workers to participate. 

While undocumented immigrants are ineligible to receive federal Earned Income Tax Credits, several states, including California, Colorado and Maine, have expanded their tax credit to include eligible workers regardless of immigration status. 

Washington, D.C., followed suit this year and is expanding its credit to match the federal amount by tax year 2026, something no state has done. Officials funded that — and other budget items to help lower-income residents — by changing income tax rates and brackets last year. Now top earners pay a greater portion of their income than the rest of the district instead of the other way around, the DC Fiscal Policy Institute says. 

“I will just note that [this] enhances racial equity in our tax code as well, because households at the high end of the income spectrum, folks in that top 20%, are disproportionately white,” said Erica Williams, the institute’s executive director. “Folks who are in the bottom 20 to 40% are disproportionately Black and brown folks.”

Top leaders in some states acknowledge their tax rules are regressive. Washington Gov. Jay Inslee “has reminded people of this fact while advancing policies to make our system more balanced,” spokesperson Mike Faulk said in an email. 

Beginning next February, more than 400,000 Washingtonians will be eligible to apply for a new Working Families Tax Credit worth up to $1,200. 

And last year, the state enacted a 7% tax on the exchange or sale of capital assets such as stocks and bonds on profits exceeding $250,000. The revenue will go toward funding childcare and early learning — if it survives an ongoing legal fight. 

But some states are going the other direction, approving tax changes likely to shift more of the burden onto lower-income earners.

So far this year, at least 10 states cut their personal income tax rates, largely in ways that benefit upper-income people, according to the National Conference of State Legislatures. Some of these states also lowered their corporate tax rates.

Idaho, for example, reduced the tax rate on its highest-income bracket. South Carolina did the same while promising additional cuts to the top rate should the state meet revenue targets.

Georgia, Iowa and Mississippi went a step further, replacing their graduated income tax brackets with a flat tax. 

flat income tax rates tend to exacerbate economic inequality: In Illinois, which has one, the state’s poorest residents paid more than 14% of their income in total state and local taxes while the wealthiest paid a little more than 7%.

The changes in tax policy in Georgia and Mississippi will disproportionately benefit white residents, according to an ITEP analysis, while reducing state revenue that could be going toward services like education that can reduce inequality.

In Washington’s financially stressed Aberdeen, Baltazar’s community, the effects of state decisions about how to tax and where to spend — and not spend — are visible everywhere.

About 80 miles southwest of Seattle, Aberdeen’s once booming lumber industry began to decline in the early 1980s due to environmental concerns and demand loss. Wages fell. From 2016 to 2020, median household income in the county, Grays Harbor, was $26,000 less than the state median. The poverty rate was more than 50% higher. Suicide rates are elevated, too.

On an overcast, gray day with intermittent rain in early July, four people drove around the city center, pointing out houses with weathered facades. They work or volunteer for Firelands Workers Action, a social welfare organization that advocates for workers in Washington’s timber country.

“The state of the housing makes a lot of people sick,” said the organization’s executive director, Stina Janssen, looking out from the back seat next to Baltazar. “It’s full of mold … and it’s extremely expensive to heat or cool.” 

They drove past a homeless encampment, tents pitched beside a field with boulders. Passing over the Chehalis River, Baltazar said: “A lot of people come here and take their life away on this bridge.” 

Formed in 2019, Firelands Workers Action advocates for good-paying jobs, affordable housing and access to healthcare. Leaders think a state tax system that asks more of high-income earners would provide funding for the better housing, schools and mental health resources the county so desperately needs.  

“There’s not enough spaces for community, not enough resources in the school for them to go to counseling,” said Baltazar, who moved to the area in 1993 from Mexico. 

When she lost her restaurant job due to an injury in 2019, Baltazar struggled to get another full-time position. She volunteered for Firelands as she searched.

A month after the property-tax bill arrived, her luck turned. She landed a job as a Firelands organizer, and her husband and daughter are both employed again, too. 

Still, there’s not enough money to go around. With a more equitable tax system, Baltazar said, perhaps she could afford repairs on her house and get a mammogram. Perhaps her county could get the resources to build a levee to reduce flooding. 

It’s a relief, at least, to have the means to shop for groceries again. The family relied on a food bank for the first time during their two-year rough stretch beginning in 2020. Now when she’s off work, Baltazar packs a picnic of sandwiches and fruit to watch the sunset with her husband at Lake Quinault, 45 minutes north of her house. 

“We struggled so much in the past,” she said, “and we need to enjoy life.”

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