Households earning less than $18,700 pay 12.7 percent of their income in state and local taxes, compared to 2.3 percent for those earning more than $548,700
LAKE MARY, FL – A new study released today by the Institute on Taxation and Economic Policy (ITEP) and Florida Policy Institute (FPI) finds that the lowest-income Floridians — those earning less than $18,700 — pay five and a half times as much in taxes as a share of their household income than the state’s wealthiest residents, or those earning upwards of $548,700.
The study, Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, evaluates all major state and local taxes, including personal and corporate income taxes, property taxes and sales and other excise taxes.
ITEP points out that states like Florida with “low tax” reputations are, in fact, high tax states for low-income residents. Florida ranks 48th in the nation for state and local tax fairness, according to the analysis. The state has multiple regressive tax code features, including lack of a personal income tax — which helps to mitigate inequality — and a comparatively high reliance on sales taxes. Florida derives more than half of its tax revenue from sales and excise taxes, according to ITEP, which far exceeds the national average of 35 percent. These taxes cost the most for lower-income families, as these households spend a greater share of their incomes on purchasing the items and goods they need. As incomes increase, the share spent on everyday expenses decreases.
Florida’s upside-down tax system would be made worse, according to FPI, under Amendment 5. The measure would require a two-thirds vote of the state Legislature to raise state revenue, taxes and fees or eliminate tax breaks and loopholes, which would lock in current inequities.
Florida already ranks 50th for investments in public services and can’t afford restrictions on future revenue.
“It comes as no surprise that Florida ranks so poorly in terms of tax fairness, as our state relies heavily on sales and excise taxes while state leadership allows special interest tax breaks to remain unfettered in the tax code,” said Sadaf Knight, interim co-executive director of FPI. “Florida clearly has a long way to go in ensuring that everyone is paying their fair share.”
There’s also a more practical reason for Florida and all states to be concerned about regressive tax structures, according to ITEP. If the nation fails to address growing income inequality, states will have difficulty raising the revenue they need over time. The more income that goes to the wealthy (and the lower a state’s overall tax rate on the wealthy), the slower a state’s revenue grows over time.
“Rising income inequality is unconscionable, and it is certainly a problem that local, state and federal lawmakers should address,” said Meg Wiehe, deputy director of ITEP and an author of the study. “Regressive state tax systems didn’t cause the growing income divide, but they certainly exacerbate the problem. State lawmakers have control over how their tax systems are structured. They can and should enact more equitable tax policies that raise adequate revenue in a fair, sustainable way.”
FPI’s mission is to advance state policies and budgets that improve the economic mobility and quality of life for all Floridians.
ITEP is a non-profit, non-partisan tax policy organization. ITEP conducts rigorous analyses of tax and economic proposals and provides data-driven recommendations on how to shape equitable and sustainable tax systems.