Income taxes offer an important counterbalance as they tend to be progressive, which means that they ask more of families with a greater ability to pay.
Most taxes levied by state and local governments are regressive, meaning that they charge higher rates, relative to income, for low- and middle-income taxpayers than for wealthy families. Critically, a flat tax guarantees that wealthy families’ totalstate and local tax bill will be a lower share of their income than that paid by families of more modest means. Flat taxes have some surface appeal but come with significant disadvantages. In short: A flat tax is one where each taxpayer pays the same percentage of their income whereas a graduated tax applies higher rates to higher incomes. What’s the difference? And are states well served by the transition?
While most states have a graduated rate income tax, some state lawmakers have recently become enamored with the idea of moving toward flat rate taxes instead.
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