Does a Flat Income Tax Create Income Inequality?

April 28, 2014

This morning, we released a new report which takes a close look at CBPP's recent insinuation that Illinois' flat income tax played an important role in creating Illinois' income inequality and that it contributed to the state's chronic budget problems. As it turns out, their claims aren't backed by the facts.

Author and economist Lyman Stone concludes:

"Concerns about inequality are an important part of public policy debates. But condemning simple, flat taxes as contributing to inequality (when they are, by definition, flat) is factually unsupported. Further, there is no evidence that more progressive taxes are inherently better for state finances. In fact, the evidence suggests that high, non-neutral taxes can hurt economic growth, leading to worse outcomes for the whole state regardless of where on the distribution tables a person’s income happens to fall."

Read the full post here.

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