Those are some of the conclusions of a new study released by the Institute on Taxation and Economic Policy, a nonpartisan research group. The report found that after itemized deductions, the richest 1 percent of Americans pay taxes at an average rate of 5.2 percent of their income. Middle-class residents, on average, pay taxes at a rate of 9.4 percent, and the poorest 20 percent pay at a rate of 10.9 percent.
"In effect, what we have is an upside-down system in which the more you earn, the less you pay in taxes," said Matthew Gardner, executive director of ITEP and the principal author of the study. "I don't think anyone would intentionally set out to design a tax code that way."
According to Gardner's findings, the 10 states where "regressive" taxation most significantly tilts in favor of the rich are Washington, Florida, South Dakota, Tennessee, Texas, Illinois, Arizona, Nevada, Pennsylvania and Alabama.
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Washington, Florida and Texas were named to a list of 10 states where the poor and the middle class paid higher tax rates than the rich.
In Washington, for instance, the poorest 20 percent of residents pay taxes at a rate nearly six times higher than those of the state's richest 1 percent.
Vermont, Delaware and New York, meanwhile, are states with relatively flat, fair tax practices, the study found.
The study's goal was to try to inform future tax policy by creating an understanding of how differing state approaches benefited varying income levels, Gardner said.
"We want to shed light on how tax systems work and help provide a benchmark for judging the current systems," he said, though he stressed that ITEP was not making any specific policy recommendations.
The study's figures were calculated by analyzing and merging the overall affect of the three most common forms of taxes: income, property and sales. In states with no income tax, for instance, sales taxes and fees often account for a larger percentage of state revenue. In general, the report found that income taxes tend to be fairer than property or sales taxes because they graduate depending on salary. Sales taxes, on the other hand, tend to disproportionately target the poor and lower-middle class, because over time those fixed costs account for a much higher percentage of wages than they do for the well-off.
The report comes at a time when cities and states across the country are enacting a host of new taxes and surcharges to try to cover budgetary shortfalls brought on by the recession. In New York, Gov. David Patterson has proposed an "iPod tax" that would add a surcharge on every music download. In California and Pennsylvania, tuition hikes at state colleges and universities are being implemented. Oregon is debating whether to raise income taxes on corporations and the wealthy.
On the federal level, raising taxes remains a taboo subject, but Congress has moved to close tax loopholes for offshore accounts in the hopes of recouping billions of dollars in potential revenue.
Amid this backdrop, Gardner said he hopes his study will help illustrate who is bearing the largest tax burden in the country. "The answer for just about every state," Gardner said, "is the poor and the lower to middle classes."
