See all “Low Tax for Who?” states
New data from the Census Bureau appear to lend support to Florida’s reputation as a “low tax state,” ranking it 45th nationally in taxes collected as a share of personal income.1 But focusing on the state’s overall tax revenues has led many observers to overlook the fact that different taxpayers experience Florida’s tax system very differently. In particular, the poorest 20 percent of Florida residents pay significantly more of their income (13.2 percent) in state and local taxes than any other group in the state. For low-income families, Florida is far from being a low tax state.2 In fact, only two states tax their poorest residents more heavily than Florida.
No Income Tax, but High Sales and Excise Taxes
According to the Census Bureau, Florida’s state and local tax collections totaled 8.8 percent of personal income in fiscal year 2011, well below the national average of 10.6 percent. One reason for Florida’s low ranking is that it is one of just nine states that does not levy a broad-based personal income tax.
But failing to levy an income tax comes at a cost. In order to pay for state and local government services, Florida’s sales and excise taxes are 20 percent above the national average. Measured relative to personal income, Florida has the 11th highest sales and excise tax collections in the entire country. According to the Institute on Taxation and Economic Policy (ITEP), the poorest 20 percent of Florida households spend 9.1 percent of their income on these taxes, compared to just 0.9 percent of income for the state’s most affluent residents.
A High Tax State for the Poor
While Florida’s state and local taxes average 8.8 percent of income, differently positioned taxpayers experience Florida’s tax system very differently. For the top 1 percent of Florida households (a group with an average income over $1.5 million), the Sunshine State’s decision not to levy a personal income tax has indeed been an enormous boon. This group pays just 2.3 percent of their income in Florida taxes—the 3rd lowest (or 47th highest) state and local tax bill for this group in the entire country.
But while Florida’s reputation as a “low tax state” is accurate for wealthy households, it bears little resemblance to reality for the state’s less affluent residents. The poorest 20 percent of Florida taxpayers (earning an average income of $10,300 per year) actually face the 3rd highest state and local tax bill in the entire country, at 13.2 percent of income.
Florida’s imbalanced tax system, with its heavy reliance on sales and excise taxes, is pushing the state’s impoverished taxpayers deeper into poverty. The state’s lack of a personal income tax has been a major contributor to its reputation as a “low tax state,” but it comes at a steep price in terms of higher tax rates on low-income families.
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The article examines Florida's tax landscape, challenging the notion that it is a uniformly "low tax state." While the overall tax ranking places Florida at 45th nationally in taxes collected as a share of personal income, a closer look reveals a nuanced reality.
1. Tax Distribution:
- The report emphasizes that Florida's tax burden is not evenly distributed across its residents. Despite the state's reputation as a "low tax state," the poorest 20 percent of Florida residents bear a disproportionate tax burden, paying 13.2 percent of their income in state and local taxes.
2. No Income Tax, High Sales and Excise Taxes:
- Florida stands out as one of nine states without a broad-based personal income tax. This absence of income tax is a key factor contributing to Florida's low overall tax ranking. However, to compensate for this, the state relies heavily on sales and excise taxes, which are 20 percent above the national average.
3. Tax Disparities:
- The Institute on Taxation and Economic Policy (ITEP) is cited in the article to highlight the disparities in tax burdens among different income groups. While the top 1 percent of Florida households benefit significantly from the lack of a personal income tax, paying only 2.3 percent of their income in state taxes, the poorest 20 percent face a much higher burden, with 9.1 percent of their income going towards sales and excise taxes.
4. Impact on Low-Income Families:
- The imbalanced tax system in Florida, with its heavy reliance on sales and excise taxes, is portrayed as detrimental to low-income families. The absence of a personal income tax, while advantageous for the wealthy, results in higher tax rates for the less affluent, potentially exacerbating poverty.
In summary, the article unveils the complexity of Florida's tax system, dispelling the simplistic notion of a uniformly "low tax state." It underscores the importance of considering the distributional impact of tax policies on different income groups, shedding light on the challenges faced by low-income families in a state known for its purportedly low taxes.
