...Of course, we all know that our tax dollars fund our public schools, and most of us know that state and local revenue is the primary source of this funding (about 90 percent; on average, about half state and half local). Less commonly-known, however, is who pays these bills – who bears the largest share of the tax burden, relative to their income? At the federal level, taxation is largely progressive, which means that, on the whole, higher-income families pay a larger percentage of their earned income to the federal government than lower-income families. This is, very simply, due to the fact that higher income brackets are taxed at higher rates.
But when it comes to state and local taxes, the picture is different. The poorest families pay far more of their income than the richest (i.e., taxes are regressive). In other words, the money that funds public education is a burden disproportionately borne by poor and middle-income Americans. And the lower your income, the more of it you pay. Given this situation, combined with a fiscal crisis that threatens to linger for several years, the best solution – raising revenue through a more equitable system – may be the only one not on the table.
Let’s take a very quick and easy look at how much families at different income levels are taxed, and what it means for education. Every few years, the Institute on Taxation and Economic Policy releases a wonderful report that breaks down these “tax burdens” for every state (and overall). States (and localities) vary widely in their tax policies and rates, but most generate the same structure of burden.
The graph below (which I recreated using data from the report) shows the percentage of family income that is paid to the three major types of state/local taxes – income, property, and sales – by how much families earn....
Matthew Di Carlo