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State Low-Income Tax Relief in the Absence of an Income Tax

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Publication Date: February 2008

Publisher(s): Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Iris J. Lav; Phillip Oliff

Special Collection: John D. and Catherine T. MacArthur Foundation

Topic: Banking and finance (Taxation and tax policy)
Social conditions (Public welfare and social services)

Keywords: State budgets; Tax code; Income diversity; Economic projections

Type: Report

Abstract:

Most states target tax relief to low- and moderate-income households. In part, this is because without such relief, state and local taxes would absorb a much larger share of the income of poor and near-poor families than of families at higher income levels. This is particularly true in states that do not use a personal income tax, because they rely more heavily on sales, excise and property taxes. The regressivity of state taxes — the higher burden on lower-income households — can add to the difficulty lower-income earners have in supporting their families.In states without an income tax, however, the task of targeting tax relief becomes somewhat more difficult because there is no readily available mechanism to measure who should receive relief.