10 States With the Worst Taxes for Average Americans

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10. Indiana
> ITEP index score: -6.6%
> Effective tax rate lowest 20%: 12.0% (8th highest)
> Effective tax rate top 1%: 5.2% (23rd highest)
> 2013 Gini coefficient (pre-tax): 0.46 (17th lowest)

A negative score on the ITEP index means state residents’ incomes were less equal after taxes than they were before taxes. With a score of -6.6%, Indiana’s tax system was the 10th most regressive among all states. While what makes a tax code fair is a contentious issue, middle class families are often among the hardest-hit by regressive tax policies. Indiana households who earned between $34,000 and $56,000 paid 10.8% of their combined income in state and local taxes, the fourth highest tax burden among that income group nationwide. Indiana’s taxation policies may have had an effect on income inequality in the state. Indiana’s Gini coefficient in 2013 had grown at nearly the fastest pace from 2009.

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9. Kansas
> ITEP index score: -6.9%
> Effective tax rate lowest 20%: 11.1% (13th highest)
> Effective tax rate top 1%: 3.6% (11th lowest)
> 2013 Gini coefficient (pre-tax): 0.46 (20th lowest)

While Kansas has a graduated income tax structure — widely regarded as a progressive feature in a tax code — the state has no corporate income tax. This means that the vast majority of businesses in the state are exempt from paying state taxes. Since business owners tend to have relatively high incomes, wealthier Kansas residents have likely benefited from this arrangement. As a share of income, the poorest families in Kansas paid 310% what the wealthiest 1% of families paid in state and local taxes, the ninth highest such ratio nationwide. As in many states, incomes among the wealthiest Kansas residents grew between 2009 and 2013, while incomes among poorer residents shrank. The tax code in Kansas will likely remain relatively unfair to poorer residents. The state’s aggressive income tax cuts of 2012 and 2013 resulted in a budget shortfall. To address the shortfall, Governor Sam Brownback proposed earlier this year to raise several excise taxes.

8. Arizona
> ITEP index score: -7.1%
> Effective tax rate lowest 20%: 12.5% (5th highest)
> Effective tax rate top 1%: 4.6% (19th lowest)
> 2013 Gini coefficient (pre-tax): 0.47 (20th highest)

Families in Arizona earning $22,000 or less in 2012 paid 12.5% of their incomes in state and local taxes, the fifth highest rate for that income group in the country. The wealthiest 1% of Arizona households were subject to an effective tax rate of only 4.6%, which was also smaller than the average tax rate for the wealthiest people across the nation of 5.4%. As in most states ITEP found to have unfair tax systems, sales and excise taxes were considered particularly regressive. The poorest Arizona residents paid more than 8% of their incomes in general sales and excise taxes, while the wealthiest 1% paid just 1% of their incomes in such taxes. States identified as having regressive tax codes did not necessarily have dramatic income inequality. Arizona, however, had a higher Gini coefficient than that of most states, and 18.6% of residents lived in poverty in 2013, among the highest poverty rates nationwide.