Are states with only sales tax, and no income tax, regressive?

Answer by A Quora admin:

It is not an absolute, but if a state has no income tax then obviously the state will tend to rely on sales tax and property tax for revenue.  Both sales and property tax tend to hit lower income families more than the typical income tax.

But the regressive nature of a state’s total tax system is impacted more by how the three major tax sources are implemented.

According to The Institute on Taxation and Economic Policy the 10 states where the poorest 20% of the population pay the highest percentage of total personal income as state taxes are:

Of those 10, 5 have no or minimal state personal income tax:

South Dakota

Illinois, Pennsylvania, Arizona, Kansas and Indiana all have a state income tax on personal income, but still overall have a regressive tax system measured by the percentage of income paid in state taxes.

States like California tend to score well on the measure of how progressive the state tax system is.  California relies heavily on personal income tax with 10 tax brackets and a wide range of income tax rates from 1% up to 13.3%. Alaska and Wyoming have no state income tax, yet in Alaska the poorest 20% pay 7% of income as state tax and in Wyoming the poorest 20% pay 8.2%.  Both lower than the 10.2% average paid by the poorest in California. The wealthy and upper middle class pay a much higher percentage of total state tax in California.

Which leads to another measure of how regressive a state’s taxes are. Overall taxation can impact the percentage of total state tax paid by the poorest 20%.  The above analysis is based on percentage of the poor person’s income that is going to pay taxes.  But which states place more burden on the poor in total for overall tax collection.

In conclusion, not having a statewide personal income tax may tend to make a state’s overall tax system more regressive, but it is not an absolute rule.