Public Assets Institute Vermonttaxes are higher, as a percentage of income, on the poor and those in themiddle than they are on the 1 percent atthe top, according to the new study "Who Pays?" released Wednesday by the Institute on Taxation and Economic Policy (ITEP). Vermontis notalone; the wealthiest pay less than everyone else in all states. But Vermontis better than most when it comes to collecting taxes from those whoare betterable to pay, according to the study.
"In recent years, multiple studies have revealed the growingchasm between the wealthy and everyone else,” said Matt Gardner, executivedirector of ITEP. “Upside down state tax systems didn’t cause the growingincome divide, but they certainly exacerbate the problem. Statepolicymakersshouldn’t wring their hands or ignore the problem. They should thoroughlyexplore and enact tax reform policies that will maketheir tax systems fairer.”
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The 50-state study citesVermont for having one of the leastregressive tax systems in the country.Vermont gets good marks forhaving a "very progressive" personalincome tax system—that is, a systemin which the effective tax rate rises forthose with higher incomes.Thestudy alsocredits Vermont for offering refundable income tax credits.Vermont piggy-backsonto the federal Earned Income Tax Credit forpeople who work in low-wage jobs.The state credit amount is equal to 32percent of federal credit, and if thestate credit is more than the filer owesin state income taxes, she gets thedifference as a refund.
But the fairness of Vermont’s personal income tax is more thanoffsetby sales and property taxes that tend to fall more heavily on low- and middle-incometaxpayers than on the top 1 percent.
“Many people think Vermont has a progressive tax system.We don’t,” said Paul Cillo, president of thePublic Assets Institute. “Theregressive property tax is Vermont’s largest singlerevenue source supporting state and local public services,” he said, “and theLegislature hasbeen shifting more and more public costs onto the propertytax.”
The study points out a practical reason for states to beconcerned about regressive tax structures. If the nation fails to address itsgrowingincome inequality problem, states will have difficulty raising therevenue they need over time. The more income that goes to the wealthy (and thelower a state’s tax rate on the wealthy), the slower a state’s revenue growsover time.
“Americans generally have a visceral reaction to taxes, but thetruth is we need them to make state governments work for all citizens,” saidMeg Wiehe, ITEP state policy director. “The problem with our state tax systemsis that we are asking far more of those who can afford the least.”
Source: Public Assets Institute, 1.14.2015.Public Assets Institute is anonprofit, nonpartisan organization that promotes sound state budget and taxpolicies that benefit all Vermonters.More information atwww.publicassets.org. The reportis available online atwww.whopays.org. The Institute on Taxation andEconomic Policy (ITEP) is a 501 (c) (3) non-profit, non-partisan researchorganization that works on federal,state, and local tax policy issues. ITEP'smission is to ensure that elected officials, the media, and the general publichave access to accurate,timely, and straightforward information that allowsthem to understand the effects of current and proposed tax policies.www.itep.org.