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Federal Income Tax Burden Varies Among States

A new study (Fiscal Fact No. 231, June 2, 2010) released earlier this week by the Tax Foundation shows the nation's tax system has become more progressive. They write:

“Recently released IRS data for 2008 shows how progressive the U.S. income tax system has become. Taxpayers earning under $50,000 collectively earned 22 percent of the total adjusted gross income (AGI), but paid just 8 percent of all income taxes at an effective tax rate of 5 percent. Meanwhile, taxpayers earning over $200,000 collectively earned 29 percent of total AGI but paid more than half of all income taxes at an effective rate of 22 percent.

“While the national figures are quite progressive, the distribution of federal income taxes varies quite widely for each state. Some states have a fairly even distribution of federal income tax liability while other states have a far more progressive distribution than the national average.”

According to the Tax Foundation, Connecticut taxpayers have the most progressive distribution of federal income taxes:

“Taxpayers earning under $50,000 earned 13 percent of the AGI in the state, but paid 5 percent of the federal income taxes paid by all taxpayers in the state. By contrast, taxpayers earning over $200,000 earned 44 percent of the AGI, but paid 66 percent of the income taxes.”

The study says the state with “perhaps the flattest distribution” is West Virginia, followed by Maine. Other states having “low distribution” include Hawaii, Indiana, Iowa and Kentucky.

Virginia federal taxpayers earning under $50,000 collectively earned 19% of the total adjusted gross income (AGI), but paid just 7% of all income taxes at an effective tax rate of 5%. Meanwhile, taxpayers earning over $200,000 collectively earned 28% percent of total AGI and paid almost half of all income taxes at an effective rate of 22% percent, which places the Commonwealth near the U.S. averages.

The table in the study provides the statistics for each state so tell your friends to forward the study to their friends in other states.

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