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According to recent reports, Washington, Georgia and Hawaii have the least fair tax system, while Montana, Oregon and South Carolina benefit from the highest tax fairness.
The findings were released by WalletHub, who ranked the 50 U.S. states depending on the fairness of their local and state tax policy. Values such as income taxes, property taxes and sales and excise taxes were all taken into account, while keeping in mind that states like Montana don’t have sales tax, while others like Washington don’t have state income tax.
Experts from the financial services website also conducted a national online survey, which assessed the perceptions of 1,050 Americans regarding what constitutes a fair tax system, at a local and state-wide level. Respondents from different income levels were included in the research, and the public’s views were analyzed against actual tax policies applied in each of the 50 states.
When asked what percentage of income should be represented by taxes, study participants varied their answers according to the financial prosperity of the tax payer.
For instance, they estimated that 2.5% tax should be paid by households whose annual income was just $5000. On the other hand, for households which earn up to $2.5 million per year, respondents believed contributions should be much higher, at 16.36%.
The general trend was that high incomes should be taxed much more steeply, in comparison with low revenues. This progressive structure was favored by liberals and conservatives likewise, although it appears the latter tend to propose slightly higher taxes for the poor, and lower ones for the affluent.
Researchers also compared household income against average state and local tax burden, based on estimations by the Institute on Taxation and Economic Policy (ITEM). They established that lower incomes tend to ultimately bear the burden of tax, instead of having these rates equally distributed among all income levels.
This regressive system allows higher income earners to pay much less relative to their resources, as the needy struggle to cope with their contributions. More exactly, those in the lowest 20% in terms of income face a tax burden of 10.9%, while the top 1% pay less than a half (5.4%).
The top 10 most fair tax systems in the country were identified in the following states: Montana, Oregon, South Carolina, Delaware, Idaho, Minnesota, Utah, Virginia, Colorado and Maryland.
On the opposite side of the spectrum, were states such as: Washington, Georgia, Hawaii, Arkansas, Illinois, Florida, Mississippi, Texas, Indiana and Arizona.
Researchers also named the states where the top 1% are the most undertaxed. In this ranking, Wyoming, Nevada, Florida, South Dakota and Washington led the pack.
The middle class had to pay excessive contributions in states like Arkansas, New York, Mississippi, Hawaii and Kentucky, while the poor were the most overcharged in places such as Washington, Hawaii, Illinois, Florida and Rhode Island.
Overall, experts concluded that blue states (which voted predominantly for the Democrats in the 2012 presidential election) benefit from relatively fairer tax systems than red states (which voted for the Republicans).
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