Taxing Poor Families

Every state with a sales tax imposes a tax burden on low-income families, but as a new report details, 19 out of the 42 states with income taxes levy taxes on two-parent families of four with incomes below the poverty line. The report by the Center on Budget and Policy Priorities highlights that some states impose the tax on those in severe poverty.

• In Alabama, families with two children owe income tax when their earnings reach just $4,600.
• Six other states — Hawaii, Indiana, Louisiana, Michigan, Montana, and West Virginia — also tax the incomes of three- or four-person families earning less than three-quarters of the poverty line.

A few states -- Kentucky, Montana, Ohio, the District of Columbia, and Rhode Island -- have reduced the tax burden on the poor in recent years, but others like Alabama have actually increased the tax burden on poor families since the early 1990s. A supposely "high-tax" state like California imposes no income tax until a married couple with two children make at least $42,700. Which illustrates a key point. Watch out when you hear corporate conservatives talking about the "average" tax burden in any state, since they are usually ignoring the actual tax burden on working families. Since wealth is so skewed, states that tax wealthier citizens often increase their "average" tax rate without increasing the burden on your average taxpayer. Conversely, states like Alabama can claim to be low-tax states even as they impose some of the steepest taxes on lower-income families.