A recent analysis conducted by the Institute on Taxation and Economic Policy (ITEP) has unveiled a concerning trend in the United States, indicating that 44 out of the 50 states are exacerbating wealth inequality by allowing the wealthy to pay a smaller share of their income in taxes compared to lower-income individuals.

The research unveiled that state and local tax structures in the US are "upside-down," with a significant number of states lacking robust personal income tax provisions. This tax setup enables wealthier Americans to evade their fair share of taxes. Additionally, the reliance on sales and excise taxes, which are considered regressive due to their disproportionate impact on those with lower incomes, further fuels this inequality.

ITEP's research director, Carl Davis, emphasized the gap between public sentiment and the actions of state lawmakers regarding tax fairness, stating, "When you ask people what they think a fair tax code looks like, almost nobody says we should have the richest pay the least. And yet when we look around the country, the vast majority of states have tax systems that do just that. There's an alarming gap here between what the public wants and what state lawmakers have delivered."

The analysis found that only six states and the District of Columbia possess tax systems that reduce inequality rather than exacerbate it. In these jurisdictions, the poorest fifth of the population pays an average tax rate that is 60% higher than the top 1% of households.

Furthermore, the study revealed that the wealthiest individuals are subject to significantly lower tax rates than any other income group in 42 states. Shockingly, in 36 states, the poorest residents face higher tax rates relative to any other income group.

The analysis identified the states with the most regressive tax systems, ranking Florida, Washington, Tennessee, Pennsylvania, and Nevada as the top five. On the other hand, the least regressive jurisdictions were found to be the District of Columbia, Minnesota, Vermont, New York, and New Jersey.

The report also shed light on the detrimental impact of state-level policies that have prioritized tax cuts for the wealthy under the guise of stimulating economic activity. This has further contributed to worsening wealth inequality in the US. In recent decades, the level of inequality in the country has been far more significant compared to other comparable nations. While certain measures, such as the child tax credit, provided relief for the poorest segments of society during the pandemic, many of these initiatives have since lapsed.

ITEP's state policy director, Aidan Davis, highlighted the possibility of reversing the upside-down tax systems, stating, "There is a clear path forward for flipping upside-down tax systems, and we've seen a handful of states come pretty close to pulling it off. The regressive state tax laws we see today are a policy choice, and it's clear there are better choices available to lawmakers."

The findings of the analysis underscore the urgent need for policymakers to address wealth inequality and implement fair tax reforms that do not burden the most vulnerable segments of society while lightening the tax load on the wealthy.