Anti-Racist State Budgets: Progressive Revenue

This primer is part of a series on anti-racist state budgets. To understand the concept of creating anti-racist state budgets, it is important to understand the difference between racist and anti-racist ideas and policies. The following excerpts are from How To Be An Antiracist (2019) by Ibram X. Kendi: 


Racist vs. Anti-racist Ideas

A racist idea is any idea that suggests one racial group is inferior or superior to another racial group in any way. Racist ideas argue that the inferiorities and superiorities of racial groups explain racial inequities in society. . . An antiracist idea is any idea that suggests the racial groups are equals in all their apparent differences – that there is nothing right or wrong with any racial group. Antiracist ideas argue that racist policies are the cause of racial inequities.

Racist vs. Anti-racist Policies

A racist policy is any measure that produces or sustains racial inequity between racial groups. An antiracist policy is any measure that produces or sustains racial equity between racial groups. . . There is no such thing as a nonracist or race-neutral policy. Every policy in every institution in every community in every nation is producing or sustaining either racial inequity or equity between racial groups. 

For additional race-equity concepts and definitions, please visit the Racial Equity Tools glossary webpage.

Overview

We all benefit from funding for education, health care, infrastructure, and other vital services regardless of race, gender, or income level. But the wealthy few have used an army of lobbyists and complicit lawmakers to drive down their own tax rates and to rig the rules. This has created regressive state tax systems that too often exacerbate income inequality across both race and income.[i] In “Progressive Wealth Taxation,” UC Berkeley economists Emmanuel Saez and Gabriel Zucman explained that the top marginal federal income tax rate dropped from more than 70% between 1936 and 1980 to only 37% since 2018, and “when combining all taxes at all levels of government, the U.S. tax system now resembles a giant flat tax.”[ii]

Flat taxes, and even worse, tax codes that levy higher taxes on low- and middle-income families, worsen income inequality and widen the racial wealth gap. Tax structures in 45 states exacerbate income inequality—in the 10 most regressive states, families at the bottom 20% of the income distribution pay up to six times as much in taxes as the state’s wealthiest families.[iii] While the investments made possible by taxes are a powerful force in combating racial inequities, the way those taxes are collected, and from whom, remains deeply inequitable. Regressive state tax policies have deep and lasting roots in anti-Blackness,[iv] and in tandem with discriminatory and exploitative policies that embedded racism across all social and economic systems (e.g., in ownership of land and access to housing, education, and credit[v]), state tax policies have not meaningfully addressed the growing racial wealth gap; and in many states, especially in the South,[vi] these policies actually make racial disparities worse. As of 2016, Black and Latinx families had a median net worth of $17,600 and $20,700, respectively, compared to $171,000 for white families.[vii] A recent study concluded that “if you belong to a historically marginalized racial or ethnic group, your racial status is the stronger predictor of your economic position than your education, income, and in this case, employment status and position.”[viii]

Line chart shows the share of net worth of all U.S. households from 1989-2019. In 2019, White Americans held 85.5% of the country’s net worth; black Americans, held 4.2%. (Data source: https://www.vox.com/2020/6/17/21284527/systemic-racism-black-americans-9-charts-explained)


Strong communities and thriving families are built upon a foundation of public investments that benefit us all. Investments in good schools, affordable health care, and transportation infrastructure pay off for everyone. Research shows that higher levels of income inequality create a drag on economic and state tax revenue growth.[ix] States with fairer tax codes enjoy faster economic growth, faster income growth, and increased employment levels than states that are reliant on regressive taxes like sales and excise taxes.[x]

Under a lopsided tax code, a state’s poorest families are paying the most in taxes, while also bearing the brunt of disinvestment when tax revenues decline. During the Great Recession, states slashed education and health care budgets in the face of revenue shortfalls, with lasting consequences for low-income Black, brown, and white communities.[xi] Years of public disinvestment have left the same communities less prepared to weather the COVID-19 public health crisis and future economic downturns. For example, many states have used budget surpluses to push for “shortsighted, costly, permanent tax cuts,”[xii] which leaves these communities more vulnerable to future budget cuts,[xiii] especially as states again grapple with the risk of budget shortfalls.[xiv]

It doesn’t need to be this way; together we can rewrite tax codes to benefit us all. We’ve done this before, so we know that progressive revenue can stimulate economic growth, reduce income inequality, and narrow the gaps in income and wealth created through centuries of racism and discrimination.

Policy Considerations

Policymakers have the power to generate needed revenue by revamping their existing state’s tax codes. They can implement innovative approaches that build a more equitable future and center the needs of communities of color and low-income communities. When considering ways to promote racial equity and reduce wealth inequality in state tax systems, state legislators should refer to the following policy options and work with national and local advocates, especially those groups that center race equity, to develop the best policies for their state.

The wealthy use a range of tax avoidance strategies,[xv] including characterizing income from labor as business income, with pass-through business income in the form of long-term capital gains or dividends, all of which are taxed at a lower rate than ordinary personal income. The wealthy can also defer realizing capital gains and their inheritors can avoid taxes on these gains after they die. As explained by USC professor and tax law expert Edward J. McCaffery in his law journal article “The Death of the Income Tax,” the current tax code is really a wage tax, not an income tax, and those in the 1% of net wealth do not rely on their wages but instead use their assets as collateral to borrow tax-free.[xvi] The uber-wealthy are able to avoid income taxes and create generational wealth by relying on wealth instead of income through a process that McCaffery refers to as “buy, borrow, die.”[xvii] Therefore, we start with one of the most impactful progressive revenue reform ideas to address these loopholes: the wealth tax.

Group of diverse students at daycare or classroom

WEALTH TAX

Wealth taxes apply to either an individual’s net worth (total assets net of all debts) or some targeted asset class, which could include financial assets such as bank accounts, bonds, stocks, and/or non-financial assets such as real estate, yachts, sports cars, or other luxury goods. A wealth tax on a household above an exemption threshold is a critical tool for capturing revenue from the most affluent members of society who possess substantial wealth but may have comparatively lower incomes.

It is possible for the wealthiest households to have low taxable income because our tax codes have been designed to allow them to escape taxation in different ways. For example, the tax code does not address unrealized capital gains since until these assets are sold, they are not “taxable income” and thus, much of one’s wealth would not appear on their annual tax returns. (See Center on Budget and Policy Priorities’ report on the issue of special tax breaks for the wealthy for more information.)[xviii]

Estimates from UC-Berkeley professors Saez and Zucman indicated that a federal tax of 2% on net wealth above $50 million and 3% on net worth over $1 billion would only impact 0.1% of (or 75,000) American households and raise $2.75 trillion over a 10-year period.[xix]

Examples of Wealth Tax Legislation

Wealth Tax Design

An OECD study of European wealth taxes includes the following policy recommendations:[xxii] Low tax rates, especially if the net wealth tax comes on top of capital income taxes;Progressive tax rates;Limited tax exemptions and reliefs;An exemption for business assets, with clear criteria restricting the availability of the exemption (ensuring that real business activity is taking place and that assets are directly being used in the taxpayer’s professional activity);An exemption for personal and household effects up to a certain value;Determining the tax base based on asset market values, although the tax base could amount to a fixed percentage of that market value (e.g., 80%-85%) to prevent valuation disputes and take into account costs that may be incurred to hold or maintain the assets;Keeping the value of hard-to-value assets or the value of taxpayers’ total net wealth constant for a few years to avoid yearly reassessments;Allowing debts to be deductible only if they have been incurred to acquire taxable assets—or, if the tax exemption threshold is high, consider further limiting debt deductibility;Measures allowing payments in installments for taxpayers facing liquidity constraints;Ensuring transparency in the treatment of assets held in trusts;Continued efforts to enhance tax transparency and exchange information on the assets that residents hold in other jurisdictions;Developing third-party reporting;Establishing rules to prevent international double wealth taxation; andRegularly evaluating the effects of the wealth tax.

ESTATE TAX

Another way states can tax wealth is through an estate tax, which is levied on the estate (money and property) of the most affluent individuals who have passed away. While there is a federal estate tax[xxiii] on estates valued over $12 million (as of 2022), only 12 states and the District of Columbia have their own estate tax.[xxiv] More states have considered implementing this extremely progressive tax because it helps to prevent the growth of “dynastic wealth” by directly targeting the intergenerational transfer of wealth and addressing the racial wealth gap. In 2016, 9 out of 10 households with assets above the federal estate tax threshold of $5.5 million were white.[xxv]

Examples of Estate Tax Legislation

INHERITANCE TAX

While an estate tax is a levy on one’s estate, an inheritance tax is levied on those who inherit money or property of a person who has died. Inheritances are a major contributor to growing wealth inequality and disparities between white households and households of color. One reason white families hold more wealth is they are considerably more likely to receive an inheritance, a gift, or additional family support.[xxvi] Specifically, nearly 30% of white families report having received an inheritance or gift, compared to about 10% of Black families, 7% of Hispanic families, and 18% of other families. More robust taxation of inherited wealth not only reduces the transfer of concentrated wealth from one generation to the next, but it also serves as a progressive source of revenue for critical services that we all depend on.

Examples of Inheritance Tax Laws

Only six states impose inheritance taxes. Of these states, Nebraska (NE Stat. 77.2004, 77.2005, and 77.2006) has the highest top rate at 18% as of 2022. The state’s inheritance tax is imposed on all property inherited from the estate of the deceased. The value of such property is based on the fair market value as of the date of death, and the amount of the tax depends upon the recipient's relationship to the deceased. The surviving spouse pays no inheritance tax, children and other close relatives pay a 1% tax beyond an exemption amount, and more distant relatives pay a maximum 13% tax. In all other cases, the rate of tax is 18% on the clear market value of the beneficial interests in excess of $10,000. Unfortunately, recently enacted legislation (2022 NE LB 310) will reduce many of these rates and/or raise the exemption amounts starting in 2023.

The following states also levy a tax on inheritance. See below for details on their tax rates:

Black and Brown families wait to cross the street at the light in the Bronx, New York

PROGRESSIVE INCOME TAX

When the political realities do not allow for a wealth tax of some kind, an incremental step toward reducing the racial wealth gap is to design state personal income tax systems to better ensure that the wealthiest pay their fair share. As of 2021, nine states do not even have a broad-based state income tax,[xxvii] many of which heavily rely on sales and excise taxes, a practice that the Institute on Taxation and Economic Policy (ITEP) deemed a characteristic of the most regressive state tax systems.[xxviii] States such as California, Minnesota, New Jersey, and Vermont have highly progressive income tax brackets and graduated-rate tax structures that allow them to tax different income at different rates.[xxix] In addition, at least eight states (CA, CT, HI, MD, MN, NJ, NY, and OR) and D.C. have enacted long-lasting millionaires’ taxes since 2000.[xxx] A 2022 ballot initiative in Massachusetts would raise the income tax rate for incomes above $1 million from 5% to 9%.[xxxi]

Examples of Progressive Income Tax Legislation & Ballot Initiatives

The graduated income tax structure ensures the most affluent individuals, who are mostly white,[xxxii] pay a greater percentage of their income in taxes than their lower- and middle-income counterparts.

Millionaire Migration/Tax Flight Myth

This myth refers to the idea that taxing the wealthiest individuals will encourage them to leave and migrate to other states with lower taxes. Anti-tax advocates and politicians often use this myth to advocate for more tax cuts and regressive tax systems. However, the people who tend to move most frequently are not the rich, but instead are typically young college graduates and the lowest income residents who earn below-market incomes and want a better quality of life.[xxxvii] While a very small number of wealthy households may leave as a result of tax increases, migration rates for higher-income earners are low and have little effect on the millionaire tax base.[xxxviii] Research has shown that increasing tax rates on affluent households results in a net positive fiscal impact over time.[xxxix]  

CAPITAL GAINS TAX

States should also consider strengthening their taxes on capital gains income—the profits an investor realizes when selling an asset that has grown in value, such as shares of stock, mutual funds, or real estate investments. The Brookings Institution has a resource on capital gains reforms that discusses the current state of capital gains taxes on a federal level and different ways policymakers can use such taxes as a progressive source of revenue.[xl]

While some states levy a tax on personal income and capital gains at the same rate, as of 2021, nine states provide the wealthiest households with special tax preferences for their capital gains by taxing long-term capital gains at a lower rate than ordinary income.[xli], [xlii] These special tax breaks and preferences prioritize investors’ capital gains income at the expense of the wages and salaries earned by working families and lower-income households of color.

Examples of Capital Gains Tax Legislation

Note on the Carried Interest Loophole

Investment funds—such as private equity and hedge funds—are often organized as partnerships. These partnerships typically have two types of partners: general partners and limited partners. General partners manage the fund, while limited partners typically only contribute capital to the partnership. General partners can receive two types of compensation: a management fee tied to a percentage of the fund’s assets and a profit share; or “carried interest,” tied to a percentage of the profits generated by the fund. In a common compensation agreement, general partners receive a management fee equal to 2% of the invested assets plus a 20% share in profits as carried interest. The management fee, less the fund’s expenses, is subject to ordinary federal and state income tax rates (the top federal income tax rate for individuals in 2020 is 37%) and the federal self-employment tax. However, taxation of the carried interest is deferred until profits are realized on the fund’s underlying assets, when at such time, the carried interest is taxed [the same] as investment income received by the limited partners. Thus, if the investment income consists solely of capital gains, the carried interest is taxed only when those gains are realized and at a lower capital gains rate on the federal level (the top capital gains tax rate in 2020 is 20%, plus a 3.8% net investment income tax). (Source: Fiscal and Policy Note for 2021 MD SB 288)[xlv]
Asian toddler playing on laptop with mother

EXCESSIVE EXECUTIVE COMPENSATION TAX

In addition to a lack of progressive taxes, another contributing factor to the rise in income inequality is the excessive pay for chief executive officers (CEOs). Rather than raising the wages for their workers, corporations are increasing the wealth of their CEOs who make hundreds—sometimes thousands—of times more than their employees. Research has shown that excessive executive pay is not based on value of a CEO’s work and has a spillover effect that “helps pull up pay for privileged managers in the corporate and even nonprofit spheres.”[xlvi] Policymakers can work to address corporate greed and fight for wealth equity by closing the CEO-worker pay gap through an excessive executive compensation tax.

Examples of Excessive Executive Compensation Legislation

RAISING PROGRESSIVE MUNICIPAL REVENUE

While legislatures have the power to reform their state’s tax codes, they also have the ability to increase municipal revenue through progressive strategies. However, there are states that limit municipal powers from implementing progressive taxation structures. For example, some states have statutory and constitutional limits on the amount of property taxes that can be levied at the local level.[xlviii] As property tax revenues often support locally provided public services and amenities, state limitations on such taxes prohibit local governments from fully investing in such services. As a result, municipalities are forced to reckon with deep spending cuts, resulting in severe consequences for and decreasing the quality of life of their residents.

Income inequality is an issue that significantly affects communities on not only a national and state level, but on a local and regional scale as well. In order to effectively address disparities in wealth, state policymakers can consider legislation to promote progressive tax structures within municipalities, including repealing any state preemption of local revenue-raising authority. (See Local Progress’s 2015 report for more information about the major obstacles of raising municipal revenue, along with policy recommendations for cities, regions, and states to make local tax collections more progressive.)[xlix]

Mother nursing baby while toddler jumps on bed

Public Opinion Polling

The following sample of public opinion polls over the last few years demonstrates a strong support nationally and in sampled states for increasing taxes on the rich, including through a wealth tax, and for protecting key public programs.

NATIONAL POLLS

60% of Americans say billionaires don’t pay the full amount they owe in taxes - YouGov poll [l]

The Need for a True Wealth Tax to Support Those Most in Need Due to the Coronavirus - Data for Progress and the Justice Collaborative Institute [li]

Economy Poll - Reuters/Ipsos [lii]

January Tracker Poll - GSG, GBAO, and Navigator [liii]

Voters Support the Thrive Agenda - Data for Progress [liv]

Voters in Key States Support a Wealth Tax - Data for Progress [lv]

Small Businesses Support Raising Taxes on the Wealthy - Businesses for Responsible Tax Reform [lvi]

ALG Research for Tax March/ATF [lvii]

PBS NewsHour/Marist [lviii]

New York Times/SurveyMonkey [lix]

Financial Times/Peterson Foundation [lx]

STATE POLLS

Massachusetts - WBUR (May 2018) [lxi]

New Jersey - Rutgers/Eagleton/FDU (April 2019) [lxii]

Illinois - Paul Simon Public Policy Institute at Southern Illinois University (Spring 2020) [lxiii]

New York - Hart Research (January 2020) [lxiv]

Arizona, Colorado, Georgia, Iowa, Kansas, Kentucky, Maine, Michigan, Mississippi, North Carolina, and Texas - Data for Progress (September 2020) [lxv]

Wisconsin - Public Policy Polling (July 2019) [lxvi]

Florida - Public Policy Polling (June 2019) [lxvii]

 

Additional Resources


Endnotes

[i] Wiehe, M., Davis, A., Davis, C., Gardner, M., Christensen Gee, L., & Grundman, D. (2018). Who Pays? A Distributional Analysis of the Tax Systems in All 50 States. Institute on Taxation and Economic Policy. https://itep.sfo2.digitaloceanspaces.com/whopays-ITEP-2018.pdf

[ii] Saez, E., & Zucman, G. (2019). Progressive Wealth Taxation. Brookings Papers on Economic Activity, Fall 2019. https://www.brookings.edu/wp-content/uploads/2020/10/Saez-Zuchman-final-draft.pdf

[iii] Wiehe, et al. (2018). Who Pays?

[iv] Leachman, M., Mitchell, M., Johnson, N., & Williams, E. (2018). Advancing Racial Equity With State Tax Policy. Center on Budget and Policies Priorities. https://www.cbpp.org/research/state-budget-and-tax/advancing-racial-equity-with-state-tax-policy

[v] Kent, A. H., Lanier, N., Perkis, D.F., & James, C. (2022). Examining Racial Wealth Inequality. Federal Reserve Bank of St. Louis. https://research.stlouisfed.org/publications/page1-econ/2022/03/01/examining-racial-wealth-inequality

[vi] Das, K. (2022). Creating Racially and Economically Equitable Tax Policy in the South. Institute on Taxation and Economic Policy. https://itep.org/creating-racially-and-economically-equitable-tax-policy-in-the-south/

[vii] Dettling, L. J., Hsu, J. W., Jacobs, L., Moore, K. B., Thompson, J. P., & Llanes, E. (2017). Recent Trends in Wealth-Holding by Race and Ethnicity: Evidence from the Survey of Consumer Finances. Board of Governors of the Federal Reserve System. https://doi.org/10.17016/2380-7172.2083

[viii] Addo, F. R., & Darity, W. A. (2021). Disparate Recoveries: Wealth, Race, and the Working Class after the Great Recession. The Annals of the American Academy of Political and Social Science. https://doi.org/10.1177/00027162211028822

[ix] Petek, G. J., Bovino, B. A., & Panday, S. (2014). Income Inequality Weighs On State Tax Revenues. Standard & Poor's Ratings Services. https://s3.documentcloud.org/documents/1301747/s-amp-p-income-inequality-weighs-on-state-tax.pdf

[x] Davis, C., & Buffie, N. (2017). Trickle-Down Dries Up: States without personal income taxes lag behind states with the highest top tax rates. Institute on Taxation and Economic Policy. https://itep.sfo2.digitaloceanspaces.com/trickledowndriesup_1017.pdf

[xi] Johnson, N., Oliff, P., & Williams, E. (2011). An Update on State Budget Cuts: At Least 46 States Have Imposed Cuts That Hurt Vulnerable Residents and the Economy. Center on Budget and Policies Priorities. https://www.cbpp.org/research/an-update-on-state-budget-cuts

[xii] Institute on Taxation and Economic Policy. (2022). State Tax Watch. https://itep.org/state-tax-watch/

[xiii] Auxier, R.C. (2022). How Post-Pandemic Tax Cuts Can Affect Racial Equity: An Examination of How State Tax Changes Affected Different Income Groups and Representative Households in Arizona, Maryland, New Mexico, and Ohio. Urban Institute. https://www.urban.org/sites/default/files/publication/105447/how-post-pandemic-tax-cuts-can-affect-racial-equity_1.pdf

[xiv] Dadayan, L. (2022). States Forecast Weaker Revenue Growth Ahead of Growing Uncertainties. Tax Policy Center. https://www.taxpolicycenter.org/taxvox/states-forecast-weaker-revenue-growth-ahead-growing-uncertainties

[xv] Batchelder, L. L., & Kamin, D. (2019). Taxing the Rich: Issues and Options. SSRNhttp://dx.doi.org/10.2139/ssrn.3452274

[xvi] McCaffery, E. J. (2019). The Death of the Income Tax (or, the Rise of America's Universal Wage Tax). USC Law Legal Studies Paper No. 18-26. http://dx.doi.org/10.2139/ssrn.3242314

[xvii] Ibid.

[xviii] Marr, C., Jacoby, S., & Bryant, K. (2019). Substantial Income of Wealthy Households Escapes Annual Taxation Or Enjoys Special Tax Breaks. Center on Budget and Policy Priorities. https://www.cbpp.org/research/federal-tax/substantial-income-of-wealthy-households-escapes-annual-taxation-or-enjoys

[xix] Saez, E., & Zucman, G. (January 18, 2019). [Letter to U.S. Sen. Elizabeth Warren on impact of proposed wealth tax]. Retrieved from https://www.warren.senate.gov/imo/media/doc/saez-zucman-wealthtax.pdf

[xx] Leiserson, G., & McGrew, W. (2019). Taxing wealth by taxing investment income: An introduction to mark-to-market taxation. Washington Center for Equitable Growth. https://equitablegrowth.org/taxing-wealth-by-taxing-investment-income-an-introduction-to-mark-to-market-taxation/

[xxi] Invest In Our New York, (2021). Invest In Our New York Act [Fact sheet]. https://www.investinourny.org/media/pages/home/1f8653f0b6-1614711481/ionyactsummary_outlines_updatedmar02-2021.pdf

[xxii] OECD. (2018). The Role and Design of Net Wealth Taxes in the OECD. OECD Tax Policy Studies, 26. https://doi.org/10.1787/9789264290303-en

[xxiii] Tax Policy Center. (2020). Key Elements of the U.S. Tax System: How do the estate, gift, and generation-skipping transfer taxes work? The Tax Policy Center’s Briefing Book. https://www.taxpolicycenter.org/briefing-book/how-do-estate-gift-and-generation-skipping-transfer-taxes-work

[xxiv] Urban Institute. (n.d.). State and Local Backgrounders: Estate and Inheritance Taxes. Retrieved July 5, 2022, from https://www.urban.org/policy-centers/cross-center-initiatives/state-and-local-finance-initiative/state-and-local-backgrounders/estate-and-inheritance-taxes

[xxv] Maxwell, C., & Solomon, D. (2017). 4 Ways Repealing the Estate Tax Would Expand the Racial Wealth Gap. Center for American Progress. https://www.americanprogress.org/article/4-ways-repealing-estate-tax-expand-racial-wealth-gap/

[xxvi] Bhutta, N., Chang, A. C., Dettling, L. J., & Hsu, J. (2020). Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances. Board of Governors of the Federal Reserve System. https://doi.org/10.17016/2380-7172.2797

[xxvii] Wiehe, et al. (2018). Who Pays?

[xxviii] Ibid.

[xxix] Ibid.

[xxx] Tharpe, W. (2019). Raising State Income Tax Rates at the Top a Sensible Way to Fund Key Investments. Center on Budget and Policy Priorities. https://www.cbpp.org/research/state-budget-and-tax/raising-state-income-tax-rates-at-the-top-a-sensible-way-to-fund-key

[xxxi] Ballotpedia. (n.d.). Massachusetts Tax on Income Above $1 Million for Education and Transportation Amendment (2022). Retrieved July 5, 2022, from https://ballotpedia.org/Massachusetts_Tax_on_Income_Above_$1_Million_for_Education_and_Transportation_Amendment_(2022)

[xxxii] USAFacts. (2020). White people own 86% of wealth and make up 60% of the population. Retrieved July 5, 2022, from https://usafacts.org/articles/white-people-own-86-wealth-despite-making-60-population/

[xxxiii] Institute on Taxation and Economic Policy. (2019). How Does Your State Tax Income? https://itep.org/personal-income-tax-rate-structure-by-state/

[xxxiv] Ballotpedia. (n.d.). Illinois Allow for Graduated Income Tax Amendment (2020). Retrieved July 5, 2022, from https://ballotpedia.org/Illinois_Allow_for_Graduated_Income_Tax_Amendment_(2020)

[xxxv] Sturm, V. (2020). Gov. J.B. Pritzker’s graduated-rate income tax: Here’s what you need to know. Chicago Tribune. https://www.chicagotribune.com/politics/ct-cb-illinois-pritzker-graduated-income-tax-20200820-g3lrqjqp2ne7rkjxkjammf2ub4-story.html

[xxxvi] Ballotpedia. (n.d.). Arizona Proposition 208, Tax on Incomes Exceeding $250,000 for Teacher Salaries and Schools Initiative (2020). Retrieved July 5, 2022, from https://ballotpedia.org/Arizona_Proposition_208,_Tax_on_Incomes_Exceeding_$250,000_for_Teacher_Salaries_and_Schools_Initiative_(2020)

[xxxvii] Institute on Taxation and Economic Policy. (2018). No Need for the MythBusters, the Millionaire Tax Flight Myth is Busted Again. https://itep.org/no-need-for-the-mythbusters-the-millionaire-tax-flight-myth-is-busted-again/

[xxxviii] Young, C., Varner, C., Lurie, I. Z., & Prisinzano, R. (2016). Millionaire Migration and Taxation of the Elite: Evidence from Administrative Data. American Sociological Review, 81(3) 421–446. http://cristobalyoung.com/development/wp-content/uploads/2018/11/Millionaire_migration_Jun16ASRFeature.pdf

[xxxix] Tannenwald, R., Shure, J., & Johnson, N. (2011). Tax Flight Is a Myth. Center on Budget and Policy Priorities. https://www.cbpp.org/research/state-budget-and-tax/tax-flight-is-a-myth

[xl] Enda, G., & Gale, W. G. (2020). How could changing capital gains taxes raise more revenue? Brookings Institution. https://www.brookings.edu/blog/up-front/2020/01/14/how-could-changing-capital-gains-taxes-raise-more-revenue/

[xli] McNichol, E. (2021). State Taxes on Capital Gains. Center on Budget and Policy Priorities. https://www.cbpp.org/research/state-budget-and-tax/state-taxes-on-capital-gains

[xlii] Grundman O’Neill, D., & Wiehe, M. (2016). The Folly of State Capital Gains Tax Cuts. Institute on Taxation and Economic Policy. https://itep.org/the-folly-of-state-capital-gains-tax-cuts-1/

[xliii] Campbell, G. (2019). Fiscal Note on H.541: An act relating to changes that affect the revenue of the State- Committee of Conference. Vermont Legislative Joint Fiscal Office. https://ljfo.vermont.gov/assets/Publications/House-Bills/7bb5bb90ee/GENERAL-340238-v5-Final_Revenue_Bill_Fiscal_Note.pdf

[xliv] WA Dept. of Revenue. (2021). Capital gains tax Q&A (2019-21 proposal). Office of Financial Management. https://ofm.wa.gov/budget/state-budgets/gov-inslees-proposed-2019-21-budgets/proposed-2019-21-budget-and-policy-highlights/revenue-changes/capital-gains-tax-qa

[xlv] Rehrmann, R. J. (2021). Fiscal and Policy Note for Senate Bill 288. MD Dept. of Legislative Services. https://mgaleg.maryland.gov/2021RS/fnotes/bil_0008/sb0288.pdf

[xlvi] Baker, D., Bivens, J., & Schieder, J. (2019). Reining in CEO compensation and curbing the rise of inequality. Economic Policy Institute. https://www.epi.org/publication/reining-in-ceo-compensation-and-curbing-the-rise-of-inequality/

[xlvii] Institute for Policy Studies. (n.d.). CEO-Worker Pay Resource Guide. Retrieved July 25, 2022, from https://inequality.org/action/corporate-pay-equity/

[xlviii] Lav, I. J., & Leachman, M. (2018). State Limits on Property Taxes Hamstring Local Services and Should Be Relaxed or Repealed. Center on Budget and Policy Priorities. https://www.cbpp.org/research/state-budget-and-tax/state-limits-on-property-taxes-hamstring-local-services-and-should-be

[xlix] Sebastian, S., & Kumodzi, K. (2015). Progressive Policies for Raising Municipal Revenue. Local Progress and The Center for Popular Democracy. https://localprogress.org/wp-content/uploads/2013/09/Municipal-Revenue_CPD_040815.pdf

[l] Orth, T. (2022). 60% of Americans say billionaires don’t pay the full amount they owe in taxes. YouGov. https://today.yougov.com/topics/politics/articles-reports/2022/04/01/americans-say-billionaires-dont-pay-full-taxes

[li] Markovits, D. (2020). The Need for a True Wealth Tax to Support Those Most in Need Due to the Coronavirus. Data For Progress and The Justice Collaborative Institute. https://www.filesforprogress.org/memos/wealth-tax-coronavirus.pdf

[lii] Ipsos. (2020). A majority of Americans agree that the very rich should contribute an extra

share of their total wealth to support public programs [Press release]. https://www.ipsos.com/sites/default/files/ct/news/documents/2020-01/topline_reuters_economy_poll_pt_1_01_10_2020_0.pdf

[liii] Global Strategy Group & GBAO. (2020). Navigator January Tracker [Survey data]. https://navigatorresearch.org/wp-content/uploads/2020/01/Navigator-January-Tracker-Toplines-F01.24.20.pdf

[liv] Deiseroth, D., Mulholland, M., & NoiseCat, J. B. (2020). Voters Support the Thrive Agenda. Data For Progress. https://www.filesforprogress.org/memos/voters-support-thrive-agenda.pdf

[lv] Winter, E. (2020). Voters in Key States Support a Wealth Tax. Data For Progress and Roosevelt Forward. https://www.filesforprogress.org/memos/voters-in-key-states-support-a-wealth-tax.pdf

[lvi] Businesses for Responsible Tax Reform. (2019). POLL: Small Businesses Want to See Presidential Tax Returns, Support Raising Taxes on the Wealthy. https://docs.wixstatic.com/ugd/4a8609_130cf041386d48ae9409bc191bcf8cdb.pdf

[lvii] ALG Research. (2019). Online Nationwide Tax Poll [Survey data]. Americans for Tax Fairness. https://americansfortaxfairness.org/wp-content/uploads/Baseline-Nationwide-Tax-Online-Poll-March-15-20-2019.pdf

[lviii] Marist Institute for Public Opinion. (2019). NPR/PBS NewsHour/Marist Poll of 1,346 National Adults [Survey data]. http://maristpoll.marist.edu/wp-content/uploads/2019/07/NPR_PBS-NewsHour_Marist-Poll_USA-NOS-and-Tables_1907190926.pdf#page=3

[lix] Wronski, L. (2020). New York Times|SurveyMonkey poll: November 2020. https://www.surveymonkey.com/curiosity/nyt-november-2020-cci/

[lx] Peter G. Peterson Foundation. (2020). Majority of Voters Support Higher Taxes for Wealthy and Corporations — and Want Next President to Pay for His Priorities. https://www.pgpf.org/infographic/majority-of-voters-support-higher-taxes-for-wealthy-and-corporations-and-want-next-president-to-pay-for-his-priorities

[lxi] Brown, S. (2018). WBUR Poll: Ballot Questions On Sales Tax Rollback And 'Millionaire's Tax' Maintain High Support. WBUR. https://www.wbur.org/news/2018/05/31/sales-tax-millionaires-tax-ballot-poll

[lxii]  Rutgers-Eagleton/FDU. (2019). Joint Rutgers-Eagleton/FDU Poll: New Jerseyans Support Millionaires Tax [Survey data]. https://eagletonpoll.rutgers.edu/wp-content/uploads/2020/04/release_04-04-19.pdf

[lxiii] Paul Simon Public Policy Institute. (2020). Simon Poll, Spring 2020 (statewide) [Survey data]. https://opensiuc.lib.siu.edu/cgi/viewcontent.cgi?article=1017&context=ppi_statepolls

[lxiv] Molyneux, G., & Garin, G. (2020). New Yorkers’ Support for New Taxes on Billionaires and

Ultra-Millionaires [Poll memo]. Hart Research Associates.

[lxv] Winter. (2020). Voters in Key States.

[lxvi] Williams, J. (2019). Wisconsin Voters Strongly Support Raising Taxes on the Rich [Poll memo]. Public Policy Polling. https://taxmarch.org/wp-content/uploads/2019/07/Wisconsin-Voters-Strongly-Support-Raising-Taxes-on-the-Rich.pdf

[lxvii] Williams, J. (2019). Florida Voters Strongly Support Raising Taxes on the Rich [Poll memo]. Public Policy Polling. https://taxmarch.org/wp-content/uploads/2019/06/Florida-Voters-Strongly-Support-Raising-Taxes-On-The-Rich.pdf

Bold Public Investment Is Popular and Key to Ending This Crisis

By: Azza Altiraifi, Senior Program Manager at the Groundwork Collaborative

In the year since the COVID-19 pandemic first gripped the United States, over 525,000 people have perished and millions more - disproportionately people of color, disabled people, women, and those at the intersection of these identities—are still struggling to get by. The historic scale of the economic and public health crises we’ve faced was not inevitable. It was the result of decades of austerity policies and systematic disinvestment in the public sector at local, state, and federal levels. We cannot afford to repeat the mistakes of the past. 

Over a decade of research shows that the economics of austerity are flawed, broadly unpopular, and racist. And while accelerating vaccine distribution and imminent federal fiscal aid are promising, it will take robust, sustained, and equitable public investment at state and local levels to get out of these crises and build a resilient economy that works for everyone, instead of the wealthy few.

Austerity is Racist and Economically Destabilizing


Even before the coronavirus emerged in the US, state and local budgets and tax systems were in bad shape. In the aftermath of the Great Recession, the federal government cut aid short prematurely, leading many state and local governments to pursue austerity measures to address budget shortfalls and mitigate the economic shock. States and localities eliminated public jobs, deferred necessary maintenance on critical infrastructure like roads and bridges, and shrunk social programs and services.

Group of diverse students at daycare or classroom
A racially diverse group of elementary school students in classroom

Not only did limited federal stimulus prolong the recovery from the Great Recession, but it exacerbated race and gender inequities. Consider that while the Great Recession technically ended in June 2009, it took until 2018 for Black women’s employment to fully recover. Now, with the economy plunged into crisis again, the very austerity measures implemented in the past have left states more economically vulnerable and exacerbated the financial harms faced by low-income workers and people of color

Since February 2020, states and localities have lost 1.3 million jobs. But safety-net programs such as the unemployment insurance system struggled to scale up and distribute life-sustaining benefits in the face of such precipitous job loss and economic upheaval. This is largely because federal austerity over the past decades has shifted more responsibilities to state and local governments. Further still, austerity politics at all levels of government fuel scarcity myths and racist ideas of “deservedness,” which are then used to justify shrinking benefits and imposing cumbersome administrative barriers throughout the benefits application process.

Not only do cuts to benefits programs serving low-income people disproportionately impact Black and brown workers, they reduce state economic activity overall. Lower-income people tend to put every dollar they receive in benefits back into their state and local economy, so when programs that serve low-income households are slashed, state economies correspondingly contract. 

The cumulative effects of these austerity measures and mindsets are seen in the millions of workers and families who waited months in a pandemic to access aid that was insufficient to meet their needs. And since Black and brown people are most likely to work in the hardest-hit sectors, they face the brunt of these cascading economic harms.

People-Centered Spending Will Help End This Crisis

As states face plummeting revenues and soaring investment needs due to the COVID-19 pandemic, the case for implementing progressive tax systems to raise revenue is incontrovertible. The majority of pandemic job losses are concentrated among low-income workers, but largely white upper-income households continue to see their assets grow during the pandemic. If states had more progressive tax systems, they could tax those income gains at the top to shore up revenue, reverse concentrations of wealth and power, and promote greater racial and gender equity.

A drive-up food pantry in Sherman, TX
A drive-up food pantry in Sherman, Texas

Instead, many state budgets are more vulnerable, income inequality is worsened, and consequently, Black and brown workers are bearing an even heavier economic burden. On average, state tax systems take a 50% greater share of income from the poorest quintile of taxpayers than they take from the top one percent. Replacing these upside-down tax structures with progressive taxes on the highest earners can shore up budgets and create space for legislators to make meaningful investments in infrastructure, public health, green jobs, and more. And years of research have proven that in a depressed economy, increased public investment more than pays for itself in economic growth — more than $1 in growth for each $1 spent.

Recently, New Jersey passed a millionaires tax, which is a crucial step in addressing enduring racial and socioeconomic inequities within the state’s tax code. Heeding the call of advocates and economists, New Jersey’s state leadership rejected harmful and counterproductive budget cuts that would have exacerbated inequality and further eroded health and social infrastructure. Instead, they prioritized smart investments such as expanding the Earned Income Tax Credit (EITC) and restoring funding for an array of environmental programs.

States facing unprecedented spikes in spending due to COVID-19 and tumbling revenues can also pursue progressive taxes to balance their budgets and redistribute power and resources. And such investments are broadly popular. Polling confirms that the public opposes state budget and service cuts by wide and bipartisan margins.

Ultimately, an abundance approach to policy recognizes that people-centered spending—to restore and expand social services, revitalize key infrastructure, and build public power— is a matter of strategic investment to build a more just and equitable future. Robust public investment is broadly popular, economically sound, and necessary to advance racial justice. It’s time for state and local policies to reflect that.

Groundwork Collaborative is a research and policy advocacy organization working to advance a coherent and persuasive progressive economic worldview capable of delivering meaningful opportunity and prosperity for everyone.