Soaking the Poor, State by State
| Fri Feb. 3, 2012 4:00 AM PST
You have heard, perhaps, that rich people in America are egregiously overtaxed. And the poor? They're the lucky duckies! Why, 47 percent of Americans pay no taxes at all!
(This is not true, of course. Many poor and elderly Americans pay no federal income tax, but they pay plenty of other taxes.)
Still and all, it's true that the federal income tax is indeed progressive.
Conservatives are right about that—though it's not as progressive as it used to be, back before top marginal rates were lowered and capital gains taxes were slashed in half. But conservatives are a little less excited to talk about other kinds of taxes. Payroll taxes aren't progressive, for example. In fact, they're actively regressive, with the poor and middle classes paying higher rates than the rich.
And then there are state taxes. Those include state income taxes, property taxes, sales taxes, and fees of various kinds. How progressive are state taxes?
Answer: They aren't. The Corporation for Enterprise Development recently released a scorecard for all 50 states, and it has boatloads of useful information. That includes overall tax rates, where data from the Institute on Taxation and Economic Policy shows that in the median state (Mississippi, as it turns out) the poorest 20 percent pay twice the tax rate of the top 1 percent. In the worst states, the poorest 20 percent pay five to six times the rate of the richest 1 percent. Lucky duckies indeed. There's not one single state with a tax system that's progressive. Check the table below to see how your state scores.
Rising Asset Poverty; Diminishing Financial Security
For the first time, the Scorecard also includes a measure called “liquid asset poverty,” which excludes assets such as a home, business or car that can’t easily be converted to cash, and consequently provides a more realistic picture of the resources families have to meet emergency needs. According to that measure, 43 percent of households nationwide are “liquid asset poor” with little or no savings to fall back on if emergency strikes.
- The Assets & Opportunity Scorecard offers the most comprehensive look available at Americans’ financial security today and their opportunities to create a more prosperous future.
- The Scorecard explores how well residents are faring in the 50 states and the District of Columbia and assesses state policies that are helping residents build and protect assets across five issue areas: Financial Assets & Income, Businesses & Jobs, Housing & Home ownership, Health Care and Education.
- The 2012 Scorecard assesses states across 101 outcome and policy measures in these five areas to determine the ability of residents to achieve financial security.
- The unemployment rate continues to hover between 8 percent and 9 percent.
- For people of color, the annual unemployment rate in some states is as high as 19 percent, and
- the rate of underemployed and discouraged workers tops 23 percent.
- Between the third quarters of 2008 and 2011, the home foreclosure rate increased by almost 50 percent.
In this context, the asset poverty and liquid asset poverty data tell a story of families who increasingly have nothing to fall back on and little prospect of building a more prosperous future.This story is particularly true in parts of the country where policy has not kept pace with need. For example, in Nevada, which provides little support for programs that increase financial security, more than 45 percent of residents are asset poor – the highest rate in the nation. By contrast, Vermont, the state with the lowest asset poverty rate in the country (15.7 percent), has long supported programs that help residents improve their financial stability and future opportunities.
The story is especially disturbing for households of color, who are more than twice as likely as white households to be asset poor – 44 percent compared with 20 percent, respectively. Nearly double the proportion of households of color are liquid asset poor compared to white households (65 percent and 34 percent, respectively). Looking across the Scorecard’s other data measures, we continue to see trouble signs in areas vital to the financial health of families and the nation’s economy as a whole.
These include job quality, home ownership, access to credit and education:
- Job Quality. One in five jobs (22 percent) is low wage and nearly half of employers (46 percent) do not offer health insurance. Most workers (55 percent) do not have or participate in retirement plans. These low-quality jobs make it harder for families to both meet their needs today and create a reserve for tomorrow.
- Homeownership. Although the bottom fell out of the housing market in many parts of the country, homeownership that is achieved via safe, affordable financing remains one of the most important strategies available to American households for building wealth. Unfortunately, the housing crisis widened the already-considerable homeownership gap between white households and households of color. As of 2010, 73 percent of white households owned homes, compared with just 47 percent of households of color. As a consequence, when homes start to appreciate in value, which they eventually will, most households of color will not be building home equity.
- Access to Credit. A good credit score is critical to a person’s ability to qualify for a mortgage, a business loan or other types of safe and affordable consumer credit products. Poor credit can force individuals into the predatory short-term credit market. Credit scores are also increasingly checked as part of applications for jobs and rental housing. In America today, more than half of consumers (56 percent) have subprime credit scores.
- Education. Education is one of the key factors that leads to a financially secure future – and to ensuring a skilled workforce capable of contributing to the country’s long-term economic health. In this area, the signs are mixed. While Scorecard data show that K-12 math and reading proficiency increased between 2007 and 2011, proficiency remains extremely low: only 35 percent of 8th graders are proficient in math and just 34 percent are proficient in reading. College attainment is up by 3 percent since 2007 and the gap between attainment for whites and people of color has decreased by 2 percent – 31 percent of whites and 20 percent of people of color now hold four-year degrees. Unfortunately, increased college attainment has been coupled with increased college debt: the average debt for graduating college seniors has risen 19 percent since 2007 to $25,250.
For more information, see two narrated PowerPoints on key data findings and the critical role for state policy in creating financial security and opportunity.