Dredging up old, questionable data to score some election year points, Democrats and their allies in the media are now claiming that Texans pay more in taxes than do Californians—which is surely news to the thousands of families who have fled the Golden State for the Lone Star State (and its lower taxes) in recent years.
Here’s how the Houston Chronicle is reporting the “news”:
“Robert Peroni, a tax professor at the University of Texas at Austin School of Law, told the Express News that despite these findings first being published four years ago, not much has changed in the Lone Star State in relation to taxes,” the Chronicle explains. “Peroni added that states with income taxes, like California, actually do more to lower inequality.”
Nothing could be further from the truth. Californians pay $6,813, per capita in state and local taxes each year, according to the Tax Foundation. Texans pay $4,481 per year, per capita. That’s about two-thirds of what Californians pay.
Where’s the misinformation coming from? It’s in that study, a 2018 report from the Institute of Taxation and Economic Policy (ITEP), a left-leaning group funded by organized labor.
ITEP’s report ranks the states by estimating the share of income the richest 1% pay in state and local taxes versus the poorest 20%, and then calculates the gap. States where the wealthy pay a smaller share of their income than the poor are said to have “regressive” tax systems. States where the wealthy pay a larger share of their income than the poor are praised as having “progressive” tax systems.
Clearly, its focus is on who pays, rather than how much is paid. The data is now being misused to answer a quantitative question (which state’s residents pay more) rather than the subjective topic it was originally gathered to address (fairness).
But do “fair” tax systems really help the poor?
The answer to the question is painfully obvious: The very places ITEP praises as having the most “fair” taxes also feature the highest poverty rates. Per ITEP, the District of Columbia and California have the first- and second-most fair tax systems in the nation. They also have the first and second-highest Supplemental Poverty rates, according to the Census Bureau’s latest report. The worst offender with the most “regressive” tax system is Washington state. Washington’s poverty rate is 7.5%, about half that of California’s 15.4%.
The Supplemental Poverty Measure, published since 2009, was created to address some serious shortfalls in the more than half-century old Official Poverty Measure. The newer, more comprehensive Supplemental Poverty Measure accounts for cost-of-living differences between states, while the old poverty yardstick assumes that food and rent cost the same in New York City as it does in Lubbock, Texas. Additionally, the Supplemental Poverty Measure includes noncash benefits that many poor families receive, such as food, housing, childcare, and medical assistance, as well as the taxes they pay.
A final note about the ITEP’s report, and how it might relate to gubernatorial candidate Beto O’Rourke’s campaign: The stated intent of that report was to push for Texas and other states to adopt a personal income tax. One section of the report, for example, makes the case that “Robust personal income taxes make state tax systems less regressive.” Thus, by touting this report, candidate O’Rourke is clearly calling for a Texas income tax—even if such a tax would harm economic growth, new job creation, and bring with it a higher real poverty rate.
Portions of this essay appeared in the Washington Examiner in 2019, when the ITEP report was initially published.