Gap keeps growing between rich, poor

A new study recently release by the Institute on Taxation and Economic Policy tells us something that you likely already know. But, here goes.

The study, ​”Who Pays? A Distributional Analysis of the Tax Systems in All 50 States,” analyzes tax systems in all 50 states. The analysis evaluates all major state and local taxes, including personal and corporate income taxes, property taxes, sales and other excise taxes.

Guest what it found? It found that the lowest-income Hawaii residents pay 68 percent more in taxes as a portion of their income, compared to the state’s wealthiest residents.

Nothing too surprising, right? But it raises the question, why do those with the least pay, percentage-wise, more than those who seem to have plenty?

The study finds that those in the bottom fifth of the income spectrum in Hawaii pay 15 percent of their income in state and local taxes, while those in the top 1 percent pay only 8.9 percent, “which exacerbates inequality in our state,” according to a press release about the study.

At 15 percent, we have the nation’s second-highest state and local tax rate on people in poverty.

“Hawaii has some of the highest housing costs in the nation, coupled with the lowest wages in the nation after factoring in cost of living. It does not make sense for us to pile on additional financial pressures with a high, inequitable tax burden on the residents who are struggling the most,” said Beth Giesting, director of the Hawaii Budget and Policy Center. “Hawaii is the kind of place where we all look out for each other. Reducing the high tax burden on low- and middle-earners and asking our wealthiest residents to do more is in keeping with our values.”

The poorest 20 percent of Hawaii earners bring in an average of $10,200 per year (tying for fifth-lowest with Mississippi) while the richest 1 percent bring in $948,200. That’s almost a crazy disparity, but again, it’s not surprising. That is our economy today.

That means that, before taxes, Hawaii’s richest make 96 times more money per year than the state’s poorest. However, the richest 1 percent do not pay 96 times more in taxes. Rather, they pay only 57 times more. As a result, after taxes, the gap between the richest and poorest grows from being 96 times more to 103 times more.

Did you follow that? It The gap continues to widen between rich and poor. And there is no sign it will ever shrink.

The main cause of the heavy tax burden on those making the least in Hawaii is the General Excise Tax. Families in the lowest fifth spend 10.5 percent of their meager incomes on the GET, while the top 1 percent spend only 1.2 percent of their large earnings. In other words, those at the bottom spend 8.75 times more of their income on the GET than do those at the top, the release said.

And as the study shows, broad-based graduated personal income taxes are the most equitable way to raise revenue.

Given that low-income people are paying 68 percent more of their income in taxes than the richest in Hawaii, lawmakers should carefully weigh the distribution of their taxes, as measured by ​Who Pays?​, when considering changes to the tax code.

There’s also a more practical reason for Hawaii, and all states, to be concerned about regressive tax structures, according to ITEP, the release said — and we agreed. If the nation fails to address growing income inequality, states will have difficulty raising the revenue they need over time. The more income that goes to the wealthy (and the lower a state’s overall tax rate on the wealthy), the slower a state’s revenue grows over time.

“Rising income inequality is unconscionable, and it is certainly a problem that local, state and federal lawmakers should address,” said Meg Wiehe, deputy director of ITEP and an author of the study. “Regressive state tax systems didn’t cause the growing income divide, but they certainly exacerbate the problem. State lawmakers have control over how their tax systems are structured. They can and should enact more equitable tax policies that raise adequate revenue in a fair, sustainable way.”

That makes sense. Right?

7 Comments
  1. gordon oswald October 25, 2018 3:49 am Reply

    Boy, thank you for the article! One thing for sure, I’LL NEVER VOTE FOR A DEMOCRAT POLITICIAN AGAIN! They are calling for tax heights on everyone right now to fund their universal health care that will bankrupt our economy! What a bunch of idiots! Thank God for President Trump’s tax relief to all US citizens who pay taxes, and his planned 10% tax cut targeted to the middle class that is coming soon! The gap in income is shrinking now!!


    1. Pete Antonson October 26, 2018 1:43 pm Reply

      There is no evidence of any planning for any 10% tax cut and there is no evidence of middle easterners in the caravan. These are simply throw away lines to get the Republic Party base to vote!


  2. Andrew Walden October 25, 2018 8:22 am Reply

    Obviously the solution is to cut taxes on the rich. If the rich paid less taxes, the HGEA would not be able to create as many ‘positions’. With fewer ‘positions’, the HGEA would not have personnel to handle all the tax returns filed by poor people, thus eliminating the need to tax them. Taxes on the poor could then be zeroed out.


  3. manawai October 25, 2018 9:00 am Reply

    Thank you, Bernie Sanders, for your point of view. Yes, we should do away with all incentive to improve oneself and make it so that everyone makes exactly the same amount of money regardless of talent, skills, knowledge, experience, work ethic (if any) or dedication to advancement…or lack thereof. So why waste time finishing high school or contemplating college. It won’t make a difference in your standard of living. The State should take ALL earnings and divide them up according to the whims of our elected officials as Bernie wants. I’ve been to Cuba and seen how that works. Even the poorest street sandwich-maker pays 50% of his/her revenue (off the top) in taxes. Tobacco growers pay 90% of their sales to the government. Now that’s a sales tax for you. Yet in all the time since the Cuban revolution, these outrageous taxes have done nothing to lift the Cuban people out of poverty. It all goes into the pockets of government officials. Yes, poverty for all is only fair and it makes sure that no one has anything more than anyone else…even though they’ve earned it. Working for the government is the only way to get ahead because it doesn’t need to make a profit. It just reaches into the pockets of those who are productive and gives the money to the slackers. So why work for anything? Let’s live on the beach and party!


  4. Pete Antonson October 25, 2018 1:38 pm Reply

    Using the mean spirited “Strict Father” approach of the Republic Party, whereby the less successful people and countries are to be disrespected as erring children, the rich deserve to get more and should always be rewarded for being rich and successful. If you agree, then you should join the Republic Party!


  5. LTEreader October 26, 2018 8:49 am Reply

    @ gordon oswald:

    I think we’re all well aware by now that you won’t be voting Democrat, however to assume that Universal Healthcare will bankrupt the economy is, in typical Republican style, stretching it. BTW, it’s important to note that Universal Health Care premiums are based on income = not free for all.

    “According to a newly published United States Department of Defense “cost of war” report, U.S. taxpayers have shelled out $1.46 trillion for war since September 11, 2001, when the War on Terror began. This amounts to around $250 million per day. As the report notes, nearly $1.3 trillion of the total cost spent on the Iraq and Afghanistan wars alone. On top of this, continuing operations in Afghanistan and the U.S.-led air campaign in Iraq and Syria has totaled $120 billion.
    In July, the House of Representatives approved $696.5 billion in defense spending, which includes a base budget of $621.5 billion and $75 billion in ‘Overseas Contingency Operations dollars’, commonly referred to as ‘war money’. Conversely, the Senate passed a $640 billion base defense budget with a $60 billion allocation for war money. Both versions of the budget well exceed the Trump administration’s proposal, making this defense budget, by far, the largest defense budget in U.S. history.”

    Yet, according to you > subsidized medical insurance premiums for low & modest income earners will bankrupt us. Good one G.O.


  6. Leilani October 27, 2018 4:38 am Reply

    “War money” is also spent on many poor young people who join the military and come out with some training and education – SKILLS – when they had almost nothing from their own families.
    The military is a HUGE EDUCATIONAL SYSTEM and those in the military can help the nation in TWO WAYS – our defense if needed and by being well-disciplined citizens who don’t usually have a big chip on their shoulder like some liberals.
    My brother went into the service at 18 and came out much more confident as they wanted to make him an officer. He went to college with a renewed sense of confidence he didn’t get from my father – and ended up with a Master’s degree and a professional job.
    As for the poor – they don’t pay taxes – if they are on welfare. It isn’t their money – but something given to them and if you are too poor in Hawaii, you can move on – there is nothing promised you just because you are born in a place. The Hawaiians MOVED to Hawaii and poor Europeans moved out of Europe, too.
    Don’t sit and whine.
    The French taxed the wealthy too much and they moved away. Then the poor were sadder, because everyone became poorer. Stop dwelling on what someone else has! Money doesn’t even buy happiness – remember that?


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