A new study from the Institute on Taxation & Economic Policy (ITEP) analyzes the tax structures of all 50 states and finds that Georgia’s richest contribute a much smaller share of their income to state and local budgets than the rest of the state. While the richest 1% of Georgians (those making over $432,000 annually) pay 5% of their income in state and local taxes (including sales, income, and property taxes), the combined bottom 80% of Georgians (those making under $82,000 annually) pay nearly double that, sending 9.8% of their income to the state and locality. The lower one’s income, the higher effective tax rate – those in Georgia making under $16,000/year pay 10.4% of their earnings in state/local taxes.
One common feature of the states with the most regressive tax systems is a high reliance on sales taxes, combined with a non-existent or completely flat income tax system. This makes sense when you look at the effective tax rates that Georgians face in sales tax and income tax. Sales taxes fall primarily on the poorest Georgians, with the bottom 20% paying 8.5x more of their income than the top 1% in sales tax – something worth remembering when considering the Transportation Joint Study Committee’s policy option to hike the sales tax and more extreme proposals to eliminate our state income tax entirely.
The ITEP report also found that local property taxes in Georgia contribute to poorer Georgians paying a higher share of their income than their wealthier counterparts – the bottom 20% of Georgians pay about 1.8x as much of their income in property taxes as do the top 1%. Property taxes have risen in prominence under recent years of state education funding shortfalls – most districts have raised rates since 2008, and ITEP found that property taxes made up 21.6% of Georgia’s combined state and local budgets in 2012, up from 18.2% in 2000.