January 9, 2024

Florida’s Tax System Most Regressive in the Nation, In-Depth National Study Finds

FLORIDA - The Sunshine State’s “upside-down” tax system, under which wealthy households pay a far lesser share of their income to taxes than families with low and middle income, is the most regressive in the nation, according to the Institute on Taxation and Economic Policy’s (ITEP’s) latest edition of Who Pays? The report is the only distributional analysis of tax systems in all 50 states and the District of Columbia.

The regressivity in Florida’s tax code is largely driven by the elimination of a personal income tax roughly 100 years ago. Florida depends heavily on its general sales tax and various excise taxes, such as taxes on motor fuel, alcoholic beverages, and tobacco, to maintain a balanced budget. The nonpartisan Florida Policy Institute (FPI) has calculated that sales and excise tax revenue accounts for approximately 80 percent of Florida's total tax revenue.

Bipartisan legislation (SB 1570/HB 1601) creating the Working Floridians Tax Rebate — a state-level version of the federal Earned Income Tax Credit —  would help make the tax code fairer in Florida. FPI found that the rebate, set at 20 percent of the EITC, would put over $1.1 billion back in people’s pockets, with an estimated average rebate of nearly $513 per household in Florida.

“The Who Pays? report helps to reframe the narrative that Florida is a ‘low tax’ state,” said Sadaf Knight, CEO of FPI. “In fact, if you are from a family with very low income, Florida is a very ‘high tax’ state. Our Legislature should make every effort to address this and build more fairness into our tax code. A proposal that would greatly help, the Working Floridians Tax Rebate, has been introduced in both chambers and should be advanced this session. The Working Floridians Tax Rebate would provide a much-needed boost to families with low to moderate wages.”

ITEP’s key findings for Florida include:

  • The bottom 20 percent of Florida taxpayers, as measured by income, bear an effective state and local tax rate that is nearly five times that of the top 1 percent of households. The average effective state and local tax rate is 13.2 percent for Florida families and individuals with the lowest income, 9.1 percent for those in the middle, and 2.7 percent for the top 1 percent.
  • Florida is one of 41 states that tax the top 1 percent less than every other income group, and one of 34 states that tax residents with the lowest income at a higher rate than any other group.

Nationally, tax systems in 44 states exacerbate inequality by making incomes more unequal after collecting state and local taxes, while systems in six states plus D.C. reduce inequality, the report finds. On average across the country, the 20 percent of taxpayers with the lowest income face a state and local tax rate nearly 60 percent higher than the top 1 percent of households. The nationwide average effective state and local tax rate is 11.3 percent for the 20 percent of individuals and families with the lowest income, 10.5 percent for the middle 20 percent, and 7.2 percent for the top 1 percent.

“When you ask people what they think a fair tax code looks like, almost nobody says we should have the richest pay the least. And yet when we look around the country, the vast majority of states have tax systems that do just that,” said Carl Davis, ITEP’s Research Director. “There’s an alarming gap here between what the public wants and what state lawmakers have delivered.”

About the report:

Who Pays? is the only distributional analysis of tax systems in all 50 states and the District of Columbia. The comprehensive 7th edition of the report assesses the progressivity and regressivity of state tax systems by measuring effective state and local tax rates paid by all income groups. No two state tax systems are the same; this report provides detailed analyses of the features of every state tax code. It includes state-by-state profiles that provide baseline data to help lawmakers and the public understand how current tax policies affect taxpayers at all income levels. Over 99 percent of all state and local taxes, measured by their revenue contribution, are included in the analysis.

About ITEP:

ITEP is a non-profit, non-partisan tax policy organization. We conduct rigorous analyses of tax and economic proposals and provide data-driven recommendations on how to shape equitable and sustainable tax systems. ITEP’s expertise and data uniquely enhance federal, state, and local policy debates by revealing how taxes affect people at various levels of income and wealth, and people of different races and ethnicities.

About FPI:

FPI is an independent, nonpartisan, and nonprofit organization dedicated to advancing state policies and budgets that improve the economic mobility and quality of life for all Floridians.

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