For families living in poverty, every dollar makes a difference. Some politicians don’t get it and others don’t seem to care. These families living in poverty usually receive fairly generous tax breaks at the federal level, with those living at the poverty level often being exempt from federal income tax liability. However, the story changes when it comes to state income tax. Tax rates vary widely among the states. An economic study done by the National Center for Children and Poverty (NCCP) at Columbia University reveals Alabama taxes its poorest citizens the most – in fact, significantly more than other states.
The Columbia study examined the state income tax burden on a family of four, assuming the family has two adults and two children, or a family with a single-parent household with two children, and has earnings equal to the federal poverty level. For the family of four, this would equal an annual income of $23,624, while the single-parent household would earn $18,769 at the poverty level.
In Alabama, the family of four would typically pay $588 per year in state income tax. The family of three would carry an average tax burden of $413 per year. At the low end of the spectrum for states that charge income tax to families at the poverty level is Oregon, at $81 per year for a family of three and Michigan at $20 per year for a family of four.
The study found a total of 16 states imposed tax burdens on families of four living at the poverty level. In six states, including Alabama, those taxes exceeded $200. Fifteen states gave families of four with earnings at the poverty threshold income supplements, usually in the form of state Earned Income Tax Credits. Thirteen of those states provided credits in excess of $200 annually, and six provided credits of more than $1,000 per year.
Fewer states collected income tax from the single-parent households at the poverty level. But nine states – including Alabama, which sadly is again at the top of the list with the highest taxes – imposed taxes on those families exceeding $200 per year. It’s disgraceful for any state to penalize families living in poverty. Hopefully, our leaders in Alabama will recognize the need to make needed changes in our tax structure.
To put it in perspective, the report noted that New York State provides families living at the poverty level almost $2,000 per year in supplementary income, while Alabama charges families living in poverty lose to $400 in income taxes. Curtis Skinner, director of family economic security at NCCP told the Washington Post: “To what some people may seem like a small amount of money the research is showing really makes a big difference to low-income families.” Hopefully, we will see some action in the Alabama Legislature this year that will remedy a very bad situation. There is absolutely no way to justify punishing low income Alabamians by making them pay more than their fair share of taxes.
Sources: Washington Post, NCCP.org
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