“Property taxes on homeowners, rental property, and motor vehicles tend to affect low- and middle-income families most as a larger share of their net worth and income is tied up in these assets,” added ITEP. ITEP suggested that, under a graduated rate model, the more you earn, the higher your effective tax rate - making it more equitable for those with less income. “Critically, a flat tax guarantees that wealthy families’ total state and local tax bill will be a lower share of their income than that paid by families of more modest means,” ITEP indicated. As well, Iowa and Georgia will transition to a flat income tax in the coming years.īut, as more states push towards a flat income tax - and some even question if federal taxes should also follow suit - critics say instituting a mass flat tax would hurt poor and middle class families while benefiting the country’s top earners. Per the Institute on Taxation and Economic Policy (ITEP), there are currently 11 states that have a flat income tax - Arizona, Colorado, Idaho, Illinois, Indiana, Kentucky, Michigan, Mississippi, North Carolina, Pennsylvania and Utah. Read: 3 Ways Smart People Save Money When Filing Their Taxesĭo You Have a Tax Question? Ask a Tax Pro See: All the States That Don’t Tax Social Security
According to The Tax Foundation, this is the scenario “when all taxable income is subject to the same tax rate, regardless of income level or assets,” rather than a graduated rate income tax system. From Kansas to Wisconsin to Nebraska, the conversation surrounding a flat tax has picked up as of late, with more state legislators pushing for as much.
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