The Earth isn’t Flat, and Neither is Illinois’— or any other state’s— Income Tax

Merriman, David F.; Disher, Michael; Choi, Francis; Hu, Xiaoyan

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Description

Title

The Earth isn’t Flat, and Neither is Illinois’— or any other state’s— Income Tax

Author(s)

• Merriman, David F.
• Disher, Michael
• Choi, Francis
• Hu, Xiaoyan

Issue Date

2022-04-19

Keyword(s)

tax, income, rates, marginal, average, liabilities

Abstract

In her book, Flat Earth: The history of an infamous idea, 1 Christine Garwood explains that from medieval times, long predating Christopher Columbus’ famous voyages, educated people knew that the earth was not flat. Nevertheless, the flat earth myth persisted for centuries and even has some, possibly (non)ironic, modern adherents (see R. Brazil 2020).2 Simplistic and wrong-headed ideas often persist despite unassailable evidence to the contrary and a consensus among those who have carefully considered the question. The exaggerated dichotomy between “flat tax rate” and “graduated tax rate” states is a current manifestation of this phenomenon. Many members of the public, and some people on the fringes of the policymaking world, overstate the differences between these cases and conclude that only graduated rate states can deliver “progressive” tax policy that results in tax liabilities rising with incomes.3 Tax policy professionals realize that tax liabilities depend not only on the structure of tax rates but also on many other facets of the tax system including the definition of the tax base and myriad rules about tax credits, exemptions, and interactions between different tax systems (e.g. state and federal tax systems).4 In this short paper, we demonstrate that tax rates are just one of many determinants of state personal income tax liability. We also quantify the various ways in which tax liability can vary across states with a consistently defined measure of income

Publisher

Institute of Government & Public Affairs

Type of Resource

text

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http://hdl.handle.net/2142/113710

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