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Promote Fair Income and Estate Taxes

Taxing High-Income Residents: Better than Budget Cuts, Better for Economic Growth

After resisting the proposal for months, New York Governor Patterson has agreed with legislative leaders to raise income taxes on the wealthiest state residents in order to help close the state budget gap.  “It’s a profound breakthrough for tax fairness,” said Dan Cantor, executive director of the Working Families Party, an organization of New York individuals, labor unions and other groups that was a leader in the campaign to raise the tax rates.  The New York deal is part of a national movement of state leaders looking to raise new revenue from high-income residents to avoid budget cuts and fund needed investments for long-term economic recovery.

Overview

Most sales and property taxes are regressive and burden working families more than the wealthy; however, states can create a fair tax system by balancing those regressive taxes with an income tax that includes higher tax brackets for the very wealthy.

  • As the Tax Policy Center highlights, there is a wide disparity in state income tax systems, but recently a number of states have been seeking ways to make their tax systems more progressive.
  • Creating or increasing State Earned Income Tax Credits to ease the tax burden on lower-income working families is another tool to help increase fairness in the tax code.
  • Preserving taxes on wealthy estates is another area where states are working to maintain tax fairness (and raise some needed revenue).