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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.

The post The long struggle over taxing the rich appeared first on Center for Public Integrity.

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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.

A city’s infant mortality rate indicates the general health of a population, according to the Centers for Disease Control and Prevention. 

That is especially the case in Philadelphia, which has the highest infant mortality and poverty rates among the nation’s 10 most populous cities. In their first year, Black infants die at more than triple the rate of white babies. 

Throughout the U.S. in 2020, the leading causes of infant mortality included low birth weight and preterm birth. A guaranteed basic income for expectant parents can address those problems and even result in improved early childhood development, studies have shown. 

So Philadelphia is doing just that: offering expectant parents unrestricted cash payments to improve birth outcomes and reduce racial disparities. 

Beginning in 2024, the Philly Joy Bank will provide 250 pregnant Philadelphians with $1,000 a month in no-strings-attached cash throughout their pregnancy and for one year postpartum. Expectant parents who earn less than $100,000 annually and live in one of the city’s three neighborhoods with the highest percentages of low birth weight — majority Black neighborhoods — will be eligible for the program run by the Philadelphia Department of Public Health. 

The Philly Joy Bank has received over $3.5 million in philanthropic funding from Spring Point Partners, the William Penn Foundation and the Barra Foundation. The program is also accepting donations. The city plans to fund an additional $750,000 in program administration.

Developed in partnership between the city’s Department of Public Health and the Philadelphia Community Action Network — a coalition focused on reducing infant mortality — the pilot program resulted from hours of conversations with local community members, as well as literature reviews of similar programs in Manitoba, Canada and San Francisco. 

“We heard from Philadelphians not only that a program like this was sorely needed here, but that the amount of the monthly guaranteed income needed to be tied to a meaningful line item in a family’s monthly budget, such as housing or childcare,” said Stacey Kallem, Philadelphia Department of Public Health’s director of maternal, child, and family health division. 

The $1,000 monthly benefit is based on the costs of local housing and childcare. Doula support, financial coaching and maternal and child home visits were also requested during community focus group sessions. 

The rise of basic income

Guaranteed basic income experiments have increased in recent years as people search for solutions to growing income inequality that threatens wellbeing. Nearly 50 active guaranteed income programs exist throughout the U.S., according to Stanford Basic Income Lab, which conducts research and holds conversations on basic income. Those programs address a range of issues, including poverty and housing insecurity. 

Data from more than 7,500 participants in basic income pilots throughout the nation show the greatest spending on retail sales and services at 40%, followed by food and groceries at 28%, according to Guaranteed Income Pilots Dashboard. Participants say the cash has allowed them to pay for medical bills, student loans, professional development, diapers and extra food on the table, among other expenses. 

Critics of a general basic income argue that recipients will lose motivation to work. But years of research show that unrestricted cash helps people cover basic needs and can increase employment. A recent study on a basic income program in Stockton, California, revealed that $500 a month over 24 months resulted in improved mental health. 

Philadelphia already tested the waters through several free cash programs in recent years, including a one-time $500 payment for formerly incarcerated people and a monthly payment averaging $890 to 300 low-income people on the public housing waitlist. Kallem said the Philly Joy Bank has full support from the city of Philadelphia.

Community input

A Black mother of two, Lydia Seymour, helped develop the pilot program by sharing her lived experience, facilitating workgroups and fundraising. 

The Philadelphia Community Action Network introduced her to other moms who provided tips and resources while she was unemployed and pregnant with her second child in 2020. Eventually, the coalition paid her $25 an hour to share insight from her motherhood journey. The additional income covered some basic needs during her pregnancy, said Seymour, who now works as a coordinator for the coalition.  

Adverse birth outcomes hit close to home for Seymour, since her daughter was born at an extremely low birth weight — 1 pound, 8 ounces — in 2017. If the guaranteed income program was around at that time, she said it would have made a significant difference for her first pregnancy. 

“Across the board in any ethnic background or racial group, finances are seen as a stress and a source of need,” Seymour said. “So having an extra $1,000 during pregnancy would have helped to put food on the table.”

The Philly Joy Bank was also inspired by Manitoba’s Healthy Baby Prenatal Benefit program, which launched in 2001 to improve health outcomes during pregnancy. Recipients of the government-run program receive up to $81.41 (about $60 USD) a month throughout their second and third trimester, depending on their income. Additionally, expectant parents receive access to prenatal care and referrals to a support system where they can, among other things, learn about baby development, connect with other expectant parents, get breastfeeding support or ask questions about pregnancy. To be eligible for the program, expectant parents must have a household income under $32,000 and reside in Manitoba.

From 2001 to 2016, the Manitoba program provided over $27 million in total to around 63,000 women, according to the latest government report. In 2016, over 30% of the beneficiaries lived in First Nations communities. 

The unrestricted cash had measurable impacts. Among those: reducing the risk of low birth weights by 21% and preterm births by 17.5%, 2016 research showed. 

Study author Marni Brownell, a University of Manitoba professor in community health sciences and senior research scientist at the Manitoba Centre for Health Policy, evaluated the prenatal benefit for children born from 2003 through 2011 and followed them through kindergarten over several studies. In one paper, she found that the benefit led to increased vaccination, as well as improved cognitive and language development among First Nations children.   

For jurisdictions that want to implement a similar program, Brownell recommends free prenatal care and efforts to reduce barriers to that service, including a lack of childcare and transportation, as well as distrust of the healthcare system. 

In Philadelphia, the pilot program’s recruitment and enrollment process is still underway. The Department of Public Health anticipates holding community events and outreach in childcare centers and prenatal care sites. Philly Joy Bank will be considered for renewal if it improves financial security, as well as maternal and child health outcomes, said Kallem, adding that the city is currently selecting an external evaluator to measure the program’s impact. 

In Brownell’s eyes, the research on Manitoba’s program provides a key message: “Women know best what they need to improve their prenatal health.”

The post How guaranteed basic income can reduce infant mortality appeared first on Center for Public Integrity.

High food prices and the end of extra food-stamp allotments mean hard choices around the country for lower-income people:

“You’re having to make the decision between ‘am I paying my mortgage, or my medical bills or my medication or buying food?’” said Stacey Andernacht with hunger relief organization Feeding South Dakota. 

But in her state, there’s yet another factor pushing up costs: South Dakota is one of just three — along with Mississippi and Alabama — that levies its full sales tax rate on groceries without a credit or rebate to offset the costs.

That hits low-income people hardest because they spend a higher percentage of their income on groceries than wealthier residents, said Rick Weiland, co-founder of grassroots advocacy organization Dakotans for Health. It’s the reason that most states have eliminated sales taxes on groceries over the past couple of decades.

A bill to do the same has been introduced in the South Dakota Legislature for years to no avail. But in November 2024, South Dakotans may have the opportunity to repeal the grocery tax themselves. 

Dakotans for Health began collecting signatures earlier this month on a ballot measure that would eliminate the state portion of the grocery tax. Municipalities would be able to continue taxing groceries, as the state has more resources than localities, Weiland said. Dakotans for Health is forming a coalition of nonprofits and faith-based groups to work together on the campaign.

“This is just something that’s long overdue,” Weiland said. “And so I don’t think the timing could be any better than to do this after 20 years of failed attempts to get it done by the Legislature.” 

Grocery taxes falling out of favor

Statewide sales taxes originated in Mississippi during the Great Depression and quickly spread throughout the nation. Groceries were included in the general sales tax in most states at first, said Eric Figueroa, senior manager of strategic projects and initiatives at the Center on Budget and Policy Priorities. 

A few decades ago, concerned about the impact on hunger, states began to exempt groceries from that tax. Of the 45 states that impose sales taxes, only 12 still apply it on groceries. And nine of those — Hawaii, Oklahoma, Utah, Arkansas, Idaho, Kansas, Tennessee, Illinois and Missouri — do so at a reduced rate or offer rebates or credits. 

A surge in food prices has brought repealing grocery taxes back to the forefront of policy discussions. “It has always been an issue that anti-hunger advocates have rallied around, but I think recently we’ve seen both parties be involved in efforts to try to eliminate it and try to figure out how to pay for the loss of revenue,” Figueroa said. 

Earlier this year, Virginia eliminated its 1.5% state sales tax on groceries. (Local jurisdictions there can still levy up to 1%.) Alabama’s Legislature is poised to cut its state grocery tax rate in half. A cut already went into effect in Kansas in January, while Idaho increased its credit on the tax beginning this year. Illinois residents are in a year-long pause on collection and Tennessee instituted a three-month suspension that begins in August. 

During South Dakota Gov. Kristi Noem’s re-election campaign last year, she promised to eliminate the grocery tax. But the proposal died in the House earlier in the year. There was also concern that eliminating the tax could reduce $2 million that goes to the nine Native American reservations’ tribal government operations, though Noem later said that the tribes’ contracts would be renegotiated so they would not be economically affected. 

However, state leaders did agree to reduce the statewide general sales tax for four years, starting in July, from 4.5% to 4.2%, which will also affect groceries.     

Noem originally expressed support for Dakotans for Health’s petition. She backed out due to fear that as written, the ballot measure would jeopardize an annual $20 million that the state receives through a 1998 agreement with major tobacco companies to settle lawsuits for healthcare costs related to smoking. 

“She supported it in the past, in the present, and will in the future. But that tax cut needs to be written appropriately,” her chief of communications, Ian Fury, said in an email. He added, “The language proposed by the Governor and legislators during the legislative session did not have these problems and is the right way to go for the state.” 

Weiland expressed skepticism about the potential risk to the settlement. 

“If the initiated law we are currently circulating passes, and if the courts determine that it exempts tobacco from state sales tax, the Legislature with its one-party supermajority has full authority, before the initiative goes into effect on July 1, 2025, to eliminate any of the Governor’s recent concerns about any potential problem by amending the initiated law to fix any alleged problem,” Weiland said in a press release. 

In 2004, over 67% of South Dakotan voters cast ballots against a similar initiative to eliminate the tax on groceries. But Weiland, whose group was among those coordinating a successful 2022 ballot measure to expand Medicaid in the state, believes that the governor’s campaign for eliminating the grocery tax and legislative action in recent years will help garner widespread support for a new citizen-led proposal. He said the organization is working with the tribes to try to ensure that the loss in revenue won’t impact them. 

“By letting the people vote on it, we can bypass all the politics that goes on in the Legislature and do what we did with working on the Medicaid expansion campaign — by taking it directly to people and letting them make the decision,” Weiland said. 

The organization is going door-to-door, attending events and standing outside public buildings to collect the 17,509 valid signatures needed from registered voters. Those signatures must reach the secretary of state by May 2024 in order for it to appear on the November 2024 ballot.

The state of hunger

Accessing healthy food is already a challenge in the rural state of South Dakota, where grocery stores are sometimes few and far between. One in 12 people in the state, and one in nine children, experience hunger, according to Feeding America. 

A 2021 study that looked at grocery taxes between 2006 and 2017 found that areas with the tax experienced some of the greatest food insecurity in the nation. 

In South Dakota, food insecurity is particularly pronounced in the state’s nine Native American reservations, where residents face the additional challenge of lack of transportation. On the Rosebud Indian Reservation in St. Francis, Feeding South Dakota’s Andernacht said, residents shop at a convenience store when they can’t reach the closest grocery store 40 miles away. Getting a ride there and back can cost around $100. The nonprofit has increased its food distribution to the reservation from every other month to once a month.

Another client in the central part of the state lives 30 miles from a discount grocery store, so she bought more expensive groceries at a nearby shop where her food stamps didn’t stretch as far. As a result, she used the nonprofit’s mobile distribution food drive to supplement her groceries until she found a better paying job. Now she’s returned to the food drive due to increased food prices, Andernacht said. 

Feeding South Dakota provides food for hungry families throughout the state through programs including drive-through sites, school pantries and food boxes for seniors. 

Over 11,500 families are served through mobile food distribution per month, which Andernacht says is a 22% increase since last year. She attributes that rise to higher food costs and an end to the Supplemental Nutrition Assistance Program’s emergency allotments, which resulted in a $90 a month decrease in grocery money for the average SNAP recipient nationwide. 

Filling the revenue gap when grocery taxes disappear

Any state repealing its grocery tax must account for the loss of revenue. In South Dakota, the tax brings in about $102 million annually. 

The sales tax on groceries has an even greater impact in Alabama, generating about $500 million that goes toward the state’s already strained education coffers. 

“It’s been a very hard political problem to eliminate the tax and make up for the revenue in a way that satisfies everybody,” said Figueroa, from the Center on Budget and Policy Priorities.

However, a 2020 paper he co-authored suggests that states can raise revenues in ways that don’t hit lower-income people hardest, such as expanding taxes for the wealthy and corporations and cutting special-interest breaks. 

Figueroa also referenced a proposal in Alabama he found powerful. Proposed by the organization Alabama Arise, the plan would replace grocery-tax revenue with a cap on the state income tax deduction for federal income taxes, which would bring in an estimated $520 million annually. 

“We are in this peculiar position that we have an incredibly regressive tax in the sales tax on groceries and we have a tax cut that is really a tax break that benefits … mainly the top 5% of income earners in the state,” said Carol Gundlach, senior policy analyst at Alabama Arise. 

The plan would require a constitutional amendment, so it was not included in a current state bill to cut the sales tax for groceries in half, which Gundlach expects will pass. Eliminating the sales tax on groceries has been a priority for Alabama Arise for three decades. The organization was involved in writing the bill, education, outreach and lobbying.  

Gundlach is hopeful that South Dakota will manage to eliminate its grocery sales tax next year. 

“We get Alabama and South Dakota, then all we’ve got to do is Mississippi,” she said. 

The post Grocery taxes face the chopping block in South Dakota  appeared first on Center for Public Integrity.

While race intersects with every aspect of American life, hard data on that is limited when it comes to taxation. The IRS does not collect taxpayers’ racial or ethnic identity.

New research using novel methodology — starting with Survey of Consumer Finances household survey data, creating tax units and running a tax calculator against it — supports what Black legal scholars have long posited: that racial disparities are baked into the tax code. 

The analysis, from the Urban-Brookings Tax Policy Center, looked at the impact of the “marriage penalty,” when a couple pays more in federal income tax than the combined bill if they were single. That generally occurs when each spouse earns around the same amount of income. 

In situations where a couple pays less, they’re receiving a marriage bonus. 

The new analysis shows that Black couples are more likely to experience marriage penalties than white couples, even controlling for income. Under the 2017 Tax Cuts and Jobs Act that’s still in place, 46% of Black couples paid marriage penalties, compared to 43% of white couples. Marriage bonuses are more stark: only 36% of Black couples get them, compared to 43% of white couples.

The Tax Policy Center’s paper, published last month, builds on work by Dorothy Brown, a Georgetown University law professor who wrote The Whiteness of Wealth. Black women have worked outside the home more than white wives throughout history, she noted, whereas the marriage bonus often goes to couples with one spouse who stays home. The new paper attributed the presence of children and differences in income distribution as additional reasons for the disparities. 

The Center for Public Integrity sat down with Janet Holtzblatt, senior fellow at the Tax Policy Center and the study’s co-author, to learn more about racial disparities in the joint tax return and how agencies are working to make it easier to study the impact. 

This conversation has been edited for length and clarity.

Q: What findings surprised you while working on this paper?

To some extent our findings confirmed what others have been saying. Going back to the 1990s, there were several Black legal scholars who had looked at the data and indicated that it was likely that Black married couples would incur larger penalties than white couples. And the premise was that Black couples were more likely to have two spouses who were working and for those two spouses to have equal earnings. And our findings confirmed that. 

I expected that would be the case in the 1990s, when the scholars were first making this analysis and conclusions. And the reason I thought it’d be likely to happen in the 1990s was that … the tax rate structure and standard deduction was structured in a way that gave rise to marriage penalties. When two people got married and they were both working, their combined income as a married couple would push them into a higher tax rate. In the ‘90s, amongst all couples, you would expect a higher probability of marriage penalties. 

The other aspect was that between the 1970s and the 1990s, there were more and more two-earner couples in the labor market. I anticipated that would continue to grow so that whatever gap that legal scholars had seen in the 1990s between two-earner couples who were white, rather than two-earner couples who were Black, would shrink over time so there would be less of a racial disparity between the two groups. 

Beginning in 2001, Congress took a number of steps that reduced marriage penalties. They doubled the standard deduction and increased rate brackets for married couples relative to unmarried couples. And in 2017, under the Tax Cuts and Jobs Act, more and more married couples were getting that kind of relief. There are still lots of provisions in the tax code that give rise to marriage penalties. But I thought that the combination of more two-earner couples and that changes in the tax code to reduce marriage penalties would mitigate this observation in the ’90s that there was greater occurrence of marriage penalties among Black couples than white couples. 

We looked at marriage penalties over time, prior and post the 2000 and 2017 tax law changes. And we did find that both white and Black couples were less likely to have marriage penalties over time than before 2001. 

But there’s still a gap. 

So the biggest surprise, to me, was that after all the legislation of the past 20 years … under the 2017 tax law, we still observed that Black couples are more likely to incur marriage penalties than white couples. And that the magnitude [of the gap] is a greater percent of income for Black couples than for white couples. 

Q: What do you think still needs to be done to make the tax code more equitable for all couples?

We are beginning to do research where we see more and more inequities in the way in which the tax code affects white taxpayers versus Black taxpayers. That’s an area of research that has not had much attention, in part because we [as a country] think that the tax code is race neutral and we don’t have tax data that distinguishes taxpayers by race. 

All of that is changing now. But because it’s very unlikely, and perhaps undesirable, to have taxpayers indicate their race on their tax return, it’s also unlikely to [have] tax laws that achieve equity between Black and white taxpayers by explicitly referring to race. 

So what are the characteristics that can be observed in the tax code that affect these racial disparities? There are several factors that differentiate Black couples from white couples that contribute to marriage penalties. And some have fixes and some may represent a trade off with more desirable policy goals. 

So one way to fix the marriage penalties, which will affect both Black and white couples, is to allow couples the option of filing as individuals. That would eliminate marriage penalties and it would be very expensive. It might be difficult to allocate which spouse gets unearned income, interest income, dividend income, capital gains, and mortgage interest deductions, or who gets to claim the kids as dependents. It could still open the door for tax avoidance where taxpayers come up with strategies in order to minimize their tax liability in various ways. 

It also cuts away the progressivity of the tax code. Because right now the tax rates go up based on the combined taxpayers’ income. But if you were to tax each individual, you could then end up with a lower tax liability because one of the individuals might get taxed at a low salary and not fully adjust for the resources that the family has in combination. 

The other approach was one done in the 1980s that lasted for about three years, … called the two-earner deduction. It was targeted to a group of people who were most likely to move up into a higher tax rate as a consequence of their combined income. It gave them the opportunity to reduce their income by a portion of the lower earner’s income to alleviate marriage penalties. 

That approach is desirable in that it’s very well targeted. It’s undesirable in that the benefit of the 1980s law was regressive, because the more income [the couple had], their tax rate and the value of that deduction increased. So it was much more valuable to higher-income taxpayers than lower-income taxpayers. 

Another reason we observed marriage penalties more likely among Black couples than white couples is that Black couples are more likely to have dependents. And the reason that matters is that Congress recognizes that families with dependents have greater expenses that make it more difficult for them to pay taxes on the same amount of income as a taxpayer who doesn’t have kids. And so the tax code provides the child tax credit, the earned income tax credit and the head of household filing status. But those provisions actually lead to an increase in marriage penalties.

The head of household filing status gives taxpayers a standard deduction that’s halfway between being single and filing jointly. And that means that if an unmarried single person marries a single parent, the single parent loses a head of household filing status and it makes it more likely that they’re going to have a marriage penalty. 

When a couple gets married, their combined income may result in a smaller or no Earned Income Tax Credit, relative to what they would have gotten filing as unmarried individuals. 

Q: You mentioned that it’s not ideal to eliminate marriage penalties altogether. Why is that? 

Policymakers try to achieve a number of different goals through the tax system. One is tax progressivity, where people pay a higher proportion of their income in taxes as their income goes up. A second goal may be treating families who are similar alike … and [another is] trying to reduce complexity. 

[Marriage] neutrality may be a fourth goal, but tax experts have not found an equation that works. It’s not possible to achieve progressivity, treating similar families alike, and marriage neutrality [with neither penalties nor bonuses]. So policymakers are forced to make trade offs and sometimes those other goals have taken precedence over [eliminating] marriage penalties. In addition, there may be other goals such as tax subsidies. 

For over 100 years, in one way or another, Congress has dealt with how married couples are treated relative to unmarried couples. Sometimes it’s been to the benefit of married couples and sometimes it’s been to the benefit of unmarried couples. 

So this has been a struggle since 1913, when the tax code was first in place. And they still haven’t come up with a solution that achieves all of these goals simultaneously. 

Q: Now that all federal agencies are required to assess how their programs impact racial and ethnic equity under Biden’s Racial Justice Executive Order, do you find that there’s greater access to data around the racial implications of taxes? 

There’s definitely greater attention to how we’re going to measure this. 

Taxpayers are not asked to declare their race on their tax returns, and at least from my perspective, it’s a good thing … [because of]  concerns that it might have dangerous effects on tax enforcement. But on the other hand, without that information, we have been stymied in the past in our efforts to understand how the tax system affects Black and white taxpayers differently. 

So what is happening right now across the government agencies that evaluate tax policy — Department of Treasury, the Joint Committee on Taxation and Congress, the Congressional Budget Office, the Government Accountability Office — is [that they] are developing methodologies to impute race into the tax data. 

And they’re not alone. The Tax Policy Center is also working diligently to come up with methodologies to better understand the racial implications of tax policy. Our study on marriage penalties is an example of one way of doing it, where we started with the [Federal Reserve’s Survey of Consumer Finances] household survey data, created tax units and ran a tax calculator against that. 

But what’s [a bigger] effort for various government agencies and us, is beginning with tax return data, which can give a fuller picture of what’s going on in the tax system, and developing imputations for race and ethnicity to add to our tax analysis. Then we can get this broader picture of the different disparities in a tax code by race and ethnicity. 

Some preliminary results are beginning to emerge, but there’s still a lot of work to be done before we’re able to produce more comprehensive studies of the impact by race and ethnicity. It’s a very important question and a lot of very smart people are working as quickly as they can, but they’re essentially building new infrastructure from scratch.

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The 118th Congress that convened this month marked the end of one-party control of the federal government. The Democrat-controlled Senate and Republican-majority House will determine the landscape of tax policy for the next two years, with any action or inaction rippling for generations to come. 

In one of its first votes of the session, the House approved a bill that would make it easier for wealthy people and corporations to evade tax laws, said Amy Hanauer, executive director of the Institute on Taxation and Economic Policy. 

The “Family and Small Business Taxpayer Protection Act” would, among other things, rescind $45.6 billion in funding to enforce the tax code for businesses or households making over $400,000. The Inflation Reduction Act that passed last year granted nearly $80 billion in funding to bolster taxpayer services, auditing, operations and the modernization of the troubled Internal Revenue Service. 

“We have seen a decade of decline in IRS staffing and a decline in funding that left the agency unable to enforce the tax code, particularly for the wealthiest tax evaders whose returns tend to be more complex,” Hanauer said. She believes the bill is unlikely to pass the Democratic-controlled Senate, and President Joe Biden vowed to veto it if it reaches his desk.  

A more robust tax auditing team in the IRS is needed now more than ever, tax equity advocates say. Nearly a quarter of the IRS’s enforcement budget was slashed from 2010 to 2021, after adjusting for inflation, according to a Center on Budget and Policy Priorities analysis.  Over the same period, the number of revenue agents who audit tax returns declined by 40% — from 14,000 to 8,321.  

That change has benefited wealthy people, according to a recent report from Syracuse University’s Transactional Records Access Clearinghouse. The number of IRS audits of millionaires fell more than 70% from 2012 to 2020. 

Meanwhile, low-income workers who claimed the earned income tax credit were audited at over five times the rate of everyone else last fiscal year, the report found. 

Fewer audits of wealthy people means less revenue for public spending. The IRS recently estimated a $496 billion gap between taxes owed and collected from 2014 to 2016. 

That problem paired with federal tax cuts aimed at the rich in the last four decades has helped fuel America’s fast-growing income gap, the Center for Public Integrity reported in November. Even so, state and local tax systems are comparatively worse as a whole because the residents paying the highest share of their income in taxes make the least money, according to a calculation by the Institute on Taxation and Economic Policy.

That’s in large part because of sales taxes. Another new bill from House Republicans would switch the federal system to rely on that type of tax.

The Fair Tax Act, introduced in January, would eliminate payroll, estate, gift and income taxes and instead impose a national sales tax at 23% in 2025. Opponents say the tax would be closer to 30%. 

“This would be incredibly regressive, and its implications would end up really raising taxes on low- and middle-income families, while cutting taxes for the wealthiest people,” Hanauer said. It also would eliminate the Child Tax Credit, which helps tens of millions of low-income families. 

A 2005 advisory tax reform panel established by then President George W. Bush advised against the creation of a national sales tax. At the time, the U.S. Department of Treasury estimated that total federal taxes would more than double for a family making $40,000, while taxes would drop 19% for a family earning $300,000. 

Additionally, the House approved a rule that will increase the share of votes required to raise income taxes, while another rule would require increases in spending for programs such as Social Security, unemployment compensation and Medicare to be offset by cuts to similar programs, without an increase in taxes. 

All of that would exacerbate the nation’s wealth gap, Hanauer warned.

“There are so many things that we fail to provide in any universal way in this country that we should not be wanting to move backwards as the new Republican Congress wants to do,” she said. Higher taxes on very high levels of wealth could help pay for universal healthcare or more affordable childcare and college, she added. 

Extreme wealth is globally on the rise. A recent report released by international anti-poverty charity Oxfam found that billionaire fortunes are increasing by $2.7 billion a day throughout the world. 

“We’re in a situation where, for over 40 years, the ultra, ultra rich and big corporations have been incredibly successful at writing the rules of our economy in their favor,” said Nabil Ahmed, Oxfam America’s director of economic justice. 

“We have to tell a very different kind of story for our economy, one that brings us closer together, that invests in our children and that meets people’s rights,” he added. 

States trying a different tack on taxes

Some states are taking matters into their own hands by offering refundable tax credits or revising their tax systems to make them more equitable, Hanauer said. For instance, Washington passed a 7% capital gains tax for profits over $250,000 on assets such as stocks and bonds, with revenue from the tax going toward childcare. The state’s Department of Revenue will continue to collect the tax while it is in litigation.    

Last week, legislators in eight states — Connecticut, California, Illinois, New York, Maryland, Washington, Minnesota and Hawaii — introduced bills or announced plans to increase taxes on the wealthy.  

In Massachusetts last fall, voters approved a 9% income tax for millionaires — higher than the state’s 5% flat tax — with revenue going toward bridges, roads, public education and public transportation. 

The levy came as the public transit network struggles with a large deficit and over 600 bridges across the state are deteriorating and in need of repair, said Phineas Baxandall, policy director of nonprofit think tank Massachusetts Budget and Policy Center. 

“The schools that need the most help tend to be in low-income districts, and low-income people can suffer the most from poor transportation, especially if they don’t have the flexibility to work at home,” Baxandall said. 

It took nearly 10 years of advocacy efforts to pass the surtax on Massachusetts’ 26,200 millionaire households. The state constitution was amended to allow it.  

Baxandall sees Massachusetts as a potential model for other states. “Especially with a split Congress, states can’t wait for the feds to be their knight in shining armor,” he said. “They need to take action themselves.”

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PHILADELPHIA — In the second year of J. Jondhi Harrell’s 20-year sentence, he began to contemplate what would alter a person’s life for good. Financial literacy, employment, mentorship and community support were essential, he recalled thinking. 

“If you can’t feed yourself, if you can’t manage your money, you can’t build a solid foundation for the future,” Harrell said in the lobby of the First African Baptist Church, 13 years after completing his sentence. 

That morning in late November, his organization, TCRC Community Healing Center, gave away dried fruit, nuts, 170 turkeys and 100 chickens to more than 370 families on the church’s sidewalk. Many of the visitors that day were impacted by the prison system in some way — either because they or their loved ones had been incarcerated. 

As the organization’s founder and executive director, Harrell sees how safe and thriving communities can help build a strong foundation upon reentry. 

Each year, the more than 600,000 people released from state and federal prisons nationwide face a range of financial barriers. Difficulty accessing banking, a lack of credit, court fines and fees and dismal employment opportunities are common challenges. Together they can have devastating consequences for individuals and families, researchers say. 

Barriers to reentry are particularly relevant in Philadelphia, where nearly a quarter of residents live below the poverty line. While Philadelphians make up 12% of Pennsylvania’s population, they’re 26% of the Commonwealth’s prison population. 

Tony Lowden, former executive director of the Federal Interagency Council on Crime Prevention and Improving Reentry, recalls seeing his neighbors in North Philadelphia return from prison as a youth. They couldn’t get a job or even an interview due to their criminal record. Predatory lenders took advantage, knowing formerly incarcerated people had difficulty accessing traditional banking services, he said. 

“With all these barriers that a person has coming back into the community, rolling up in the inner city communities or rural communities where there’s no financial literacy in those areas, they end up becoming justice-involved: desperate people doing desperate things,” he said. 

Lowden vowed to do everything he could to ensure that formerly incarcerated people could earn a living wage and create financial stability in areas like his childhood neighborhood, where the odds were stacked against them. 

Now as the vice president of reintegration and community engagement at ViaPath Technologies, Lowden works to provide free educational courses and training on topics including job skills, math and language arts, personal growth and finance on tablets for people in prison and upon their reentry. The company’s services are in 64 of the largest correctional facilities in the nation, where Lowden said they serve around 1.2 million incarcerated people.  

Just as Lowden witnessed as a youth, formerly incarcerated people still face discrimination and stigma in the labor market. Some states even preclude people with criminal records from obtaining occupational licenses, such as for nurses or veterinary technicians. 

A 2021 Bureau of Justice Statistics study looked at the employment of 51,500 people released from federal prison in 2010. A third found no jobs in the four years post-release. 

For those in the study who did find employment, it took them an average of more than six months, according to the report. People of color fared the worst, with Native Americans spending over eight months to find work, compared to white people at around five months.

Job prospects are particularly important upon reentry, since people are less likely to return to prison when they have full-time employment. 

Terry-Ann Craigie, associate professor of economics at Smith College and an economic fellow at Brennan Center for Justice, where she focuses on the intersection of race, labor and mass incarceration, said the economic impact is massive. Over a lifetime, people who were imprisoned earn half a million dollars less on average than people who were not. 

But Craigie believes the current job market offers some good news for job seekers who were previously imprisoned. 

“Because of the economic climate we’re in, we’re seeing that unemployment is really … low,” said Craigie. When it’s harder for employers to fill openings, “you would expect that people with criminal records or formerly incarcerated people probably stand a better chance of getting hired.”

Another barrier: financial obligations in the form of fines, supervision fees, court costs, property forfeitures and restitution to victims. A 2017 Harvard Kennedy School report found that financial obligations can “have long-term effects that significantly harm the efforts of formerly incarcerated people to rehabilitate and reintegrate, thus compromising key principles of fairness in the administration of justice in a democratic society and engendering deep distrust of the criminal justice system among those overburdened by them.”

“Tough on crime” policies, including mandatory minimum sentencing and harsher punishments for defendants with repeat convictions, fueled mass incarceration in the 1980s and ’90s. With that came rising costs to sustain the system. Fines and fees increased. 

The justice system’s operational costs rose nationally from $84 billion in 1982 to $265 billion in 2012, adjusted to account for inflation, according to The Illinois Criminal Justice Information Authority. The number of incarcerated people facing fines tripled to 37% between 1986 and 2004.  

Racial disparities in policing and sentencing mean that fines and fees disproportionately impact Black families. 

Hakeem Rudd, pantry manager for TCRC Community Healing Center, met Harrell in the Atlanta Penitentiary in the mid-2000s. Rudd said that he’s seen people return to criminal activity to pay for their fines and fees upon release. A 2015 survey by community researchers across 14 states found that formerly incarcerated people have an average debt of $13,607 in fines and fees. 

“You served your time,” Rudd said. “You’re putting people back in the line of fire because you’re sending them home with a bill.”

Penalties for not paying fines and fees can have debilitating consequences and perpetuate cycles of poverty, studies show. While laws on criminal justice debt vary by state, driver’s license suspension, accrued interest from private debt collectors, lowered credit scores, tax refund forfeiture, re-incarceration and increased parole time are common results for people who cannot pay. 

It can also lead to disenfranchisement. A Florida law denies voting rights to an estimated 934,500 formerly incarcerated people due to outstanding fines and fees, according to The Sentencing Project. 

Louisiana is the only state where court debt is not a barrier for expungement, a legal process that removes a conviction from a person’s criminal record. That’s according to a recent National Consumer Law Center and Collateral Consequences Resource Center study. 

Some states and jurisdictions allow fines and fees to be waived or community service ordered in lieu of payment when people can’t pay. 

Across the nation, states are lifting restrictions related to unpaid fines and fees and removing other financial barriers for formerly incarcerated people. Colorado, Delaware and Nevada are among several states in recent years to prohibit the suspension of driver’s licenses for nonpayment of criminal debt. The federal Driving for Opportunity Act wending through Congress would incentivize other states to follow suit. 

A recently passed law in Washington, D.C., ensures that outstanding criminal debt does not prevent a sentence from being completed, while an Illinois act bans courts from denying requests to expunge or seal a record due to nonpayment of fines and fees. 

On the job front, 37 states — and some cities, including Philadelphia — have adopted “ban the box” laws by disallowing criminal history questions on job applications. A federal law that took effect last year prohibits federal contractors from inquiring about an applicant’s criminal record prior to a job offer. Additionally, reforms to occupational licensing laws in 39 states and D.C. since 2015 have made it easier for people with criminal records to work in fields that require licenses.

Back in Philadelphia, Harrell stood in the bright sun as he distributed food in between a steady stream of cell phone calls about the pantry operations. His organization has focused on food security since the brick-and-mortar center closed due to the pandemic in 2020. 

This fall, TCRC Community Healing Center began leasing a building from a church. Along with the food pantry, the center helps returning citizens reintegrate into society by referring them to organizations that provide guidance on rebuilding their credit, opening bank accounts and finding free professional attire. 

More than anything, Harrell said he takes pride in offering a space where cheerleading and “encouraging people to see the positive aspects of their reentry” is the norm. 

The post How financial barriers stifle formerly incarcerated people appeared first on Center for Public Integrity.

ABERDEEN, Wash. — The further I drove from Seattle toward the coast, the denser the grove of evergreen trees on a drizzly July morning. Off of the Olympia Highway,  a green welcome-to-Aberdeen sign bore the song lyrics “Come as you are” — an ode to grunge band Nirvana, which formed in the old lumber town in 1987. 

I was there to visit the team at Firelands Workers Action, an organization that advocates for good-paying jobs in Washington’s timber country. 

While reporting on state taxation, I was reminded that Washington — a place I’d called home for over five years until last fall — had policies that place a heavy tax burden on poor people. Stina Janssen, Firelands’ executive director, suggested I visit Aberdeen to see what state disinvestment looks like. So I tacked the visit onto a pre-planned trip for a best friend’s wedding.

Most states make poor residents pay a greater share of their income in taxes than wealthier people do. Across the country, the share of state and local taxes paid by the lowest-income households is 54% more than what the wealthiest households contribute, according to the Institute on Taxation and Economic Policy. 

When you’re living paycheck to paycheck, every dollar counts. A higher sales tax applied to diapers or a single increase in your property tax bill can pose tough decisions. And the burden of these taxes has been even more acute recently with high levels of inflation that have driven up the cost of essential goods. 

This is particularly true in Grays Harbor County, where the poverty rate is over 50% higher than the state average. David Henson, a longtime resident and Firelands volunteer, said the sales tax on cat food has made the item one of his greatest monthly expenses. He pointed to that and rising property taxes as the reason he’s unable to replace his 20-year-old car that needs new tires and belts. 

In Aberdeen I saw houses with peeling paint that were damaged by annual flooding. Potholes littered the roads throughout a mobile home park where homes suffered mold growth.  

“Everything is connected,” said Edith Baltazar, a Firelands organizer, from the back of the car during a tour of downtown that afternoon. Without health insurance or the funds for healthy homes, she said, people get sick and then their mental health declines. She thinks that this accounts for the area’s high suicide rates. 

With the loss of so many jobs, especially unionized ones with good pay in the area, Janssen said young people in the county don’t see a future there. “The feeling that our best hope is young people leaving is what makes a community die,” she told me. 

Tax structures that negatively impact low-income earners and people of color today are shaped by state laws that were rooted in racism and classism, researchers told me and other reporters working on this project. And because they’re often codified in the state constitutions, the systems are very difficult to change. 

“If the wealthy people … pay what they owe, there should be enough resources for everybody in the whole state,” Baltazar said back at the Firelands office. The walls were lined with posters with the message “Rebuild Timber Country” against an orange background. 

On the ride back from Aberdeen I blared Nirvana as I imagined lead vocalist Kurt Cobain driving the same route to Seattle early in his career. Cobain’s moody crooning mirrored the endlessly gray sky. I thought about Cobain’s depression that likely started in Aberdeen and how Baltazar noted the lack of mental health resources there. 

State tax policy could help address inequality. But in most states, it just makes things worse.

Our state taxation project launched today with a story that takes a nationwide look at this trend, with a significant focus on Washington state and elements that range from a quiz to an animated explainer.

We’re still reporting on this, and we’d appreciate your tips. Let us know what to look at:

Public Integrity reporter Maya Srikrishnan contributed to this piece.

The post What Nirvana’s birthplace taught me about inequality appeared first on Center for Public Integrity.

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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.”

The post How state taxes make inequality worse appeared first on Center for Public Integrity.

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ABERDEEN, Wash. — Cuando Edith Baltazar abrió en febrero la factura de impuestos sobre su propiedad, de inmediato se le quitaron las ganas de comerse los huevos que había preparado para almorzar con su hija. Su mente se puso a mil: ¿le quitarían su hogar si no podía pagar?

La hija lloró. La familia se encontraba ante una decisión muy difícil: pagar los impuestos sobre su propiedad o $2,000 en medicamentos para la diabetes. 

Los impuestos salieron ganando. 

“A veces tienes que elegir: pagar los impuestos a la propiedad en lugar de pagar la factura del agua o alguna otra cosa”, dijo Baltazar al recordar la estresante experiencia durante una entrevista realizada en julio. 

Los residentes de menores ingresos en el estado de Washington, donde vive Baltazar desde que se mudó de México en 1993, dedican casi 18% de sus ingresos anuales a pagar impuestos estatales y locales, mientras que los más ricos desembolsan un 3%. 

Todos menos un puñado de estados obligan a los pobres a contribuir una proporción mayor de sus ingresos para pagar impuestos que la de sus residentes adinerados.  Economistas llaman a este enfoque “regresivo”. En el país, los que tienen menores ingresos dedican una proporción de su salario 54% mayor para pagar impuestos estatales y locales que los que tienen más ingresos, de acuerdo el  Institute on Taxation and Economic Policy (ITEP, por sus siglas en inglés). 

Esas políticas tributarias golpean más duro a las comunidades de color. 

Los inmigrantes indocumentados contribuyen miles de millones de dólares en impuestos estatales y locales, de acuerdo con estimados del ITEP y otros grupos; sin embargo, no son elegibles para recibir muchos servicios o reembolsos financiados por impuestos. Estudios muestran que los asesores fiscales tienden a inflar las evaluaciones de propiedades de bajo costo, cuyos dueños son desproporcionadamente latinos y negros. Las facturas tributarias más elevadas incrementan las probabilidades de que ocurra lo que Baltazar temió: perder la vivienda.  

Todo esto significa que los sistemas tributarios estatales y locales que podrían contribuir a aliviar la creciente desigualdad económica en Estados Unidos están, en cambio, empeorando el problema. 

El sistema federal también incrementa la desigualdad, con vacíos legales que le otorgan exenciones fiscales masivas a las personas con un muy alto patrimonio. Pero el Servicio de Impuestos Internos (IRS, en inglés) no obliga a los residentes de bajos ingresos a llevar la carga relativa más grande. La mayoría de los estados sí lo hace. 

“Le estamos pidiendo a la gente que financie programas gubernamentales incluso cuando no pueden cubrir sus necesidades básicas, como comer y tener un techo”, señaló vía correo electrónico Ariel Jurow Kleiman, un profesor asociado en la escuela de derecho Loyola, en Los Ángeles, experto en políticas y leyes tributarias. “Eso me parece profundamente injusto”.

Una razón clave: los impuestos a la venta y otros tipos de consumo. A diferencia del gobierno federal, casi todos los estados los recaudan. Gasta 50 dólares para comprarle ropa a tu hijo y pagarás el mismo impuesto que cualquier otra persona en tu área, sin importar el ingreso. Mientras más pobre seas, mayor será la proporción de tus recursos que se van en impuestos sobre las ventas. 

La principal herramienta que tienen los estados para contrarrestar eso es el impuesto sobre la renta. Pero algunos optan por gravar a todos a la misma tasa, en lugar de seguir el modelo federal que va aumentando con la escala de ingresos.

Algunos estados, como Washington, no recaudan impuestos sobre la renta del todo. Estos lugares, en especial, cuentan mucho con los impuestos sobre las ventas y otras fuentes de ingresos que hacen que la gente pobre contribuya más. 

La forma en la que un estado decide recaudar fondos tiene un impacto no solo en quien paga más sino también en cuántos ingresos genera para financiar servicios públicos. Los residentes pobres dedican un porcentaje más alto de sus ingresos para pagar impuestos y tarifas, que financian servicios estatales y locales, pero con frecuencia terminan con menos a cambio. Ese es a menudo el caso de fondos para las escuelas. 

En un estudio de 2018, el ITEP encontró que las estructuras tributarias varían ampliamente, incluso en estados con costos de vida y una composición demográfica similar. La organización clasificó a Washington como el estado con el sistema de impuestos más regresivo del país, por ejemplo; mientras que a su vecino, Oregón, lo catalogó como uno de los más equitativos. 

Sin un impuesto estatal sobre la renta, el promedio de impuestos estatal y local de más de 9% que tiene Washington está entre los más altos de la nación. Eso es lo que Baltazar enfrenta a diario. Cuando llegó el momento de pagar la primera cuota de sus impuestos sobre la propiedad, el presupuesto de la familia ya no podía estirarse más. 

Baltazar, su esposo Rafael y su hija Kary, ya adulta, habían perdido sus empleos a tiempo completo y no podían obtener beneficios por desempleo. Su marido, quien consiguió trabajo ocasional en una granja, estuvo tres meses sin insulina para que pudieran pagar el impuesto sobre la propiedad. Tuvo que depender de remedios caseros como té de Jamaica, así como de un pequeño suministro de pastillas de metmorfina para atender su diabetes tipo 2. Entretanto, desarrolló una dolorosa úlcera estomacal que lo llevó a dejar de trabajar. 

No es un misterio cómo los estados pueden hacer que sus sistemas tributarios sean más equitativos, aseguran analistas. 

“Un impuesto sobre la renta progresivo con múltiples tasas que van subiendo a medida que aumentan los ingresos es muy aburrido y no es nuevo, pero es realmente la única forma”, dijo Richard Auxier, un experto en política fiscal del Urban-Brookings Tax Policy Center. 

Pero introducir ese cambio no será fácil. Algunos estados han hecho todo lo posible para garantizar que los esfuerzos para gravar menos a los pobres y más a los ricos terminen fracasando.

Algunas de las políticas fiscales estatales más regresivas de la actualidad se originaron durante la era de la Reconstrucción que siguió a la Guerra Civil, cuando los gobiernos de los estados del sur tuvieron que comenzar a construir escuelas y brindar otros servicios financiados por el gobierno a personas que habían estado esclavizadas.

Las tasas impositivas casi se duplicaron en el sur entre 1860 y 1870. Según un documento de la Oficina Nacional de Investigación Económica, de 2019, los sureños blancos se resistieron violentamente a cambios en el código fiscal que podían redistribuir la riqueza creada a partir de la esclavitud, organizándose para intimidar a los políticos negros. Mayores ingresos fiscales en áreas “estuvieron fuertemente correlacionados con una mayor probabilidad de un ataque violento contra los políticos negros”, encontró el académico expero en economía, Trevon D. Logan.

En última instancia, esto condujo a la adopción de políticas fiscales que favorecían a los blancos. En 1890, Mississippi adoptó una nueva constitución con una disposición que exige los votos de una mayoría de tres quintos para aprobar la mayoría de los aumentos a los impuestos, lo que garantiza que los legisladores blancos pueden bloquear tales cambios incluso si son una minoría. En 1901, Alabama adoptó una nueva constitución con topes en los impuestos a la propiedad, que limitaba la cantidad de dinero que los propietarios blancos tendrían que contribuir para financiar las escuelas públicas negras.

Uno de los delegados de Mississippi, Marye Dabney, escribió unos años más tarde que el objetivo principal de la constitución de 1890 era “eliminar efectivamente de la esfera política del Estado al negro ignorante y antipatriótico”.

El código fiscal estatal no puede divorciarse de las leyes y prácticas “racistas, sexistas y clasistas” que impiden que grandes grupos de personas acumulen riqueza, señala Andy Nicholas, investigador principal del Washington State Budget & Policy Center.

Cuando el estado de Washington todavía era un territorio en 1864, el gobierno impuso un impuesto a los adultos chinos para disuadir a los trabajadores inmigrantes de establecerse en la zona. La medida fue anulada cinco años después. 

A principios de la década de 1930, la coalición de trabajadores urbanos y agricultores rurales del estado ayudó a aprobar una iniciativa electoral para reducir los impuestos sobre la propiedad y crear un impuesto sobre la renta personal con tasas que aumentaran con la escala de ingresos. La Corte Suprema de Washington la desechó en 1933 porque consideró que violaba la constitución del estado.

“Definitivamente eliminó una herramienta que podría haber estado allí y obligó a los legisladores a depender de los impuestos al consumo”, dijo Nicholas. El sistema tributario del estado no ha cambiado mucho desde entonces.

En el otro extremo del continuo se encuentra Oregón, que tiene un impuesto sobre la renta con tasas que aumentan a medida que aumentan los ingresos y es uno de los cinco estados sin impuesto sobre las ventas.

Siempre que da charlas sobre política tributaria, Juan Carlos Ordóñez, del Center for Public Policy de Oregón, apunta a su estado vecino como ejemplo de lo que no se debe hacer.

La “situación en Washington es diametralmente opuesta y mucho peor para las personas de bajos ingresos”, señaló.

Aún así, dijo Ordóñez, la estructura fiscal de Oregón se considera solo “ligeramente progresiva”.

Los votantes del estado aprobaron una ola de disposiciones fiscales en las décadas de 1980 y 1990 que benefician en gran medida a las personas con más recursos, que son desproporcionadamente blancos. Eso es parte de una tendencia nacional que ganó fuerza a partir de la década de 1970.

“Después de las victorias del movimiento por los derechos civiles, existe esta reacción al sector público que está motivada, ciertamente en parte, por el racismo”, dijo Ordóñez. “Estamos como atrapados sufriendo las consecuencias de esas decisiones y la política equivocada que ve las inversiones públicas de una manera muy perjudicial”.

En 2005, el entonces presidente George W. Bush recurrió a expertos para recomendar reformas al código fiscal federal. Un cambio que desaconsejaron: reemplazar el impuesto sobre la renta con un impuesto federal sobre las ventas. La carga, concluyó el panel, recaería sobre todo en los estadounidenses de ingresos bajos y medios.

El total de impuestos federales para una madre soltera de bajos ingresos con un hijo aumentaría más de ocho veces de $723 a $6,186 bajo dicho sistema, calculó el Departamento del Tesoro de EEUU en ese momento. 

No se llegó a adoptar una política nacional de impuestos sobre las ventas; pero, para ese entonces, casi todos los estados dependían de ese tipo de impuestos.

El primero, Mississippi, los introdujo en medio del desempleo masivo de la Gran Depresión. El gobernador de Mississippi, Mike Conner, quien más tarde fue descrito en un artículo de la revista Time como “sólidamente a favor de la supremacía blanca”, quería revertir un enorme déficit presupuestario y al mismo tiempo reducir los impuestos a la propiedad.

Louisiana, que creó su primer impuesto sobre las ventas varios años después, en 1938, tiene hoy la tasa combinada estatal y local de impuestos sobre las ventas más alta del país con un 9,55 %, según la Tax Foundation. Su índice de pobreza, por su parte, es 50% más alto que el promedio nacional.

La gran dependencia de Louisiana en los ingresos por impuestos sobre las ventas exacerba la brecha de riqueza entre familias blancas y negras, según un informe de 2021 del Louisiana Budget Project que utilizó datos de ITEP. Principalmente debido al impuesto sobre las ventas, los hogares negros allí pagan en impuestos la proporción más alta de sus ingresos, mientras que los hogares blancos desembolsan la más baja, encontró el estudio.

“No se equivoquen, las comunidades de bajos ingresos y de color de Louisiana están subsidiando impuestos más bajos para los hogares ricos y las corporaciones a través de nuestras altas tasas de impuestos sobre las ventas”, dijo Neva Butkus, analista de política estatal en ITEP.

Los problemas que los altos impuestos a las ventas causan a las familias de bajos ingresos no son solo financieros. Una madre en Alabama fue denunciada recientemente ante el Departamento de Recursos Humanos del estado, que incluye a los Servicios de Protección Infantil, por no enviar pañales a la guardería cuando no podía pagarlos, dijo Lindsay Gray, directora ejecutiva del banco de pañales Bundles of Hope en Birmingham, una organización sin fines de lucro. 

Los impuestos sobre las ventas estatales y locales combinados de Birmingham son incluso más altos que el promedio de Louisiana. Los que no tienen problemas económicos pueden pensar que los casi $5 del impuesto sobre las ventas de los $50 de los pañales no es mucho, “pero realmente impacta a una familia enormemente”, dijo Gray.

“Cuando las familias literalmente tienen $0, esos $5 una y otra vez realmente suman y pueden ser realmente devastadores”, dijo. “Cada 25 centavos y cada dólar cuentan cuando las familias viven en la pobreza”.  

Los gobiernos estatales y locales tienen principalmente dos herramientas para hacer que los impuestos sean más equitativos, dijo Jurow Kleiman de la facultad de derecho de Loyola: reducir los impuestos que pagan las personas de bajos ingresos a través de estructuras de impuestos sobre la renta más progresivas y mediante la transferencia de fondos a través de programas y reembolsos, como las versiones estatales del Crédito Tributario por Ingreso del Trabajo del IRS.

“Todo es parte del mayor costo de ser pobre”, dijo Jurow Kleiman sobre los impuestos que afectan más a las personas de bajos ingresos. “Pero en el caso de los impuestos, es un costo impuesto consciente e intencionalmente por los gobiernos, lo que en teoría significa que podemos hacer algo al respecto con relativa facilidad”.

Treinta y cuatro estados, además de Washington, D.C. y Puerto Rico, tienen esos tipos de créditos fiscales, aunque la mayoría son pequeños. Si bien los inmigrantes indocumentados no son elegibles para recibir créditos fiscales federales por ingreso del trabajo, varios estados, incluidos California, Colorado y Maine, han ampliado su crédito fiscal para incluir a todos los trabajadores que cumplan con los requisitos, independientemente de su estado migratorio.

Washington, D.C., hizo lo mismo este año y está ampliando su crédito para igualar el monto federal para el año fiscal 2026, algo que ningún otro estado ha hecho. Los funcionarios financiaron eso –y otras partidas presupuestarias para ayudar a los residentes de bajos ingresos–, al cambiar las tasas y los tramos del impuesto sobre la renta el año pasado. Ahora los que más ganan pagan una porción más grande de sus ingresos que el resto del distrito y no al revés, de acuerdo con el DC Fiscal Policy Institute.

“Solo digo que [esto] también mejora la equidad racial en nuestro código fiscal, porque los hogares en el extremo superior del espectro de ingresos, personas en ese 20% superior, son desproporcionadamente blancas”, dijo Erica Williams, directora ejecutiva del instituto. “Las personas que se encuentran entre el 20% y el 40% inferior son desproporcionadamente negras y morenas”.

Los principales líderes de algunos estados reconocen que sus normas fiscales son regresivas. El gobernador de Washington, Jay Inslee, “le ha recordado a la gente este hecho al promover políticas para hacer que nuestro sistema sea más equilibrado”, señaló el portavoz Mike Faulk en un correo electrónico.

A partir del próximo febrero, más de 400,000 habitantes de Washington serán elegibles para solicitar un nuevo Crédito Tributario para Familias Trabajadoras por un valor de hasta $1,200.

Asimismo, el año pasado, el estado promulgó un impuesto del 7% sobre el intercambio o la venta de bienes de capital, como acciones y bonos, cuyas ganancias excedan los $250,000. Los ingresos se destinarán a financiar el cuidado de niños y el aprendizaje temprano, si sobrevive una lucha legal en curso.

Pero algunos estados están yendo en la dirección contraria, al aprobar cambios en sus sistemas de impuestos que probablemente trasladarán una mayor parte de la carga a las personas de más bajos ingresos.

En lo que va del año, al menos 10 estados redujeron sus tasas de impuestos sobre la renta personal, en gran medida en formas que benefician a las personas de ingresos altos, según la Conferencia Nacional de Legislaturas Estatales.

Con la carga a cuestas

En Aberdeen, la comunidad bajo estrés financiero en la que vive Baltazar en Washington, los efectos de las decisiones estatales sobre cómo gravar y dónde gastar, y dónde no gastar, son visibles en todas partes.

A unas 80 millas al suroeste de Seattle, la otrora próspera industria maderera de Aberdeen comenzó a decaer a principios de la década de 1980, en medio de preocupaciones ambientales y una pérdida de demanda. Los salarios cayeron. De 2016 a 2020, la mediana del ingreso familiar en el condado de Grays Harbor fue $26,000 menos que la estatal. La tasa de pobreza era más de un 50% superior. Las tasas de suicidio también son elevadas.

En un día nublado y gris con lluvia intermitente a principios de julio, cuatro personas condujeron por el centro de la ciudad, señalando casas con fachadas desgastadas. Trabajan o se ofrecen como voluntarios con Firelands Workers Action, una organización de bienestar social que aboga por los trabajadores en este centro maderero de Washington.

“El estado de las viviendas enferma a mucha gente”, explicó la directora ejecutiva de la organización, Stina Janssen, mirando desde el asiento trasero junto a Baltazar. “Están llenas de moho... y es extremadamente caro calentarlas o enfriarlas”.

Pasaron junto a un campamento de personas sin hogar, con tiendas de campaña montadas junto a un campo con rocas. Al pasar sobre el río Chehalis, Baltazar comentó: “Mucha gente viene aquí y se quita la vida en este puente”.

Formada en 2019, Firelands Workers Action aboga por empleos bien remunerados, viviendas asequibles y acceso a cuidados médicos. Sus líderes piensan que un sistema de impuestos estatales que exija más a las personas de altos ingresos proporcionaría fondos para mejores viviendas, escuelas y recursos de salud mental, necesitados con desesperación en el condado. 

“No hay suficientes espacios para la comunidad, no hay suficientes recursos en la escuela para que puedan recibir consejería”, dijo Baltazar.

Cuando perdió su trabajo en un restaurante debido a una lesión en 2019, a Baltazar le costó encontrar otro puesto de tiempo completo. Mientras buscaba, se anotó como voluntaria en Firelands.

Un mes después de que le llegó la factura del impuesto sobre su propiedad, su suerte cambió. Consiguió un trabajo como organizadora de Firelands, y su esposo y su hija también hallaron nuevos empleos.

Aún así, el dinero no les suficiente. Con un sistema tributario más equitativo, dijo Baltazar, tal vez podría pagar las reparaciones de su casa y hacerse una mamografía. Quizás su condado podría obtener los recursos para construir un dique y reducir las inundaciones.

Es un alivio, al menos, tener nuevamente los recursos para comprar comida. Durante el difícil periodo que comenzó en 2020 y duró dos años, la familia debió recurrir por primera vez a un banco de alimentos. Ahora, cuando no está trabajando, Baltazar prepara un picnic de sándwiches y frutas para ver el atardecer con su esposo en el lago Quinault, 45 minutos al norte de su casa.

“Batallamos mucho en el pasado”, dijo, “y necesitamos disfrutar la vida”.

Melissa Hellmann, Maya Srikrishnan, Ashley Clarke y Joe Yerardi son reporteros del Center for Public Integrity, una redacción sin fines de lucro que investiga la desigualdad. 

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