Report: Invert State Tax Structures To Eliminate State Budget Deficits

A new study has found that inverting state tax structures--whereby the highest income earners would be taxed at the current percentage of income for the lowest income earners, and vice versa--would collectively raise $490 billion in new revenue, immediately eliminating states budget deficits and avoiding the serious consequences of budget cuts.

The report, titled "Flip It to Fix It: An Immediate, Fair Solution to State Budget Shortfalls" was released today by Boston-based United for a Fair Economy and 13 state organizations around the country.

"Flip It to Fix It" attributes a large part of states' current deficits to the regressive tax structures that the report shows are designed to fail. "Trying to raise adequate revenue through a regressive tax structure--where a greater percent of income is demanded of the poor than the well-off--is like trying to squeeze water from a stone," said Karen Kraut, coordinator of state tax policy at United for a Fair Economy and co-author of the report.

"The inadequacy of regressive tax structures puts everything we value at risk: the well-being of families, the future competitiveness of the American workforce, and the nation's ability to rebound from the recession and prosper," said Kraut.

The report contends that an inverted tax structure not only solves budget crises, but increases equity and best spurs steady and strong economic activity.

"California cannot cut its way out of budget problems and this report shows that the budget is solvable with reasonable and fair tax policy that would generate billions," stated Sylvia Allegretto, an economist from the Institute for Research on Labor and Employment at the University of California, Berkeley.

The report calls on states to adopt its proposed progressive tax reforms, many of which are immediately achievable and will help solve state deficits.