Tax cuts benefiting affluent more than poor Study finds increases hit low-income people hard, too

October 05, 1997|By NEW YORK TIMES NEWS SERVICE

In the tough years of the early 1990s, the states raised taxes that hit the poor harder than the affluent. Now that the booming economy has made the states flush with money, they are cutting taxes -- for the affluent.

Sales and excise taxes, which fall more heavily on people at low income levels, were raised $11.7 billion from 1990 through 1993, data from the National Conference of State Legislatures show. These taxes have been cut by $200 million, or less than 2 percent of the amount of the increase, since 1994.

From 1990 through 1993, the states raised income taxes, the major state tax burden on affluent people, by $8.2 billion. Since 1994, the states have more than reversed these increases with income tax cuts totaling $9.8 billion. (All the figures have been adjusted for inflation.)

In other words, individual income taxes accounted for 32 percent of all state tax increases from 1990 through 1993, but 72 percent of all state tax cuts since 1993.

"In most states, these changes have made already regressive state tax systems more regressive," said Nicholas Johnson, who studies state taxes for the Center on Budget and Policy Priorities in Washington.

Sales and other taxes that are considered regressive (because their impact declines as incomes rise) were raised by 36 states in the early part of the decade, while only nine states have cut these taxes since 1994. But only 20 states raised income taxes in the early '90s, and 20 states have cut income taxes since 1994, the budget center found.

Elizabeth Davis, a policy analyst at the Center for the Study of States in Albany, said the budget center's report "fits with what I am finding, which is that poor people now are bearing more of the burden of state taxes."

Overall, the states count on sales and similar regressive taxes for just under half of their revenue. Individual income taxes, imposed by 41 states, produce nearly one-third of state revenue.

Pub Date: 10/05/97

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