"Socialism" has been bandied about frequently in the late stages of this presidential election as a single-word rebuke of the idea of taxing the rich to pay the poor. The Washington-based Center on Budget and Policy Priorities, however, has released a new report saying that 18 states tax the working poor deeper into poverty. As we move into the worst financial crisis since the Great Depression, are regressive taxes the answer?
Last year, the federal poverty line for a family of four was $21,203. More than half of the states in the union actually collected taxes from families of four with incomes just above that poverty line. Unfortunately, provisions designed to protect low-income families from taxation were not increased to keep up with inflation, so some states increased their income taxes on the poor last year. Measures must be put in place to make sure that this doesn't happen again as we move deeper into the financial crisis. From the report, titled "The Impact of State Income Taxes On Low income People in 2007":
Some states levy income tax on working families in severe poverty. Nine states -- Alabama, Georgia, Hawaii, Illinois, Indiana, Michigan, Montana, Ohio and West Virginia -- tax the income of two-parent families of four earning less than three-quarters of the poverty line ($15,902). And six states -- Alabama, Hawaii, Louisiana, Michigan, Montana, and West Virginia -- tax the income of one-parent families of three earning less than three-quarters of the poverty line ($12,398).
In some states, families living in poverty face income tax bills of several hundred dollars. A two-parent family of four in Alabama with income at the poverty line owes $423 in income tax, while such a family owes $409 in Hawaii, $325 in Oregon, and $258 in West Virginia. Such amounts can make a big difference to a family struggling to escape poverty.
A full PDF of the report is available here.
[Image: Heritage Foundation]
Taxing The Poor







