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Four Ways That States Can Address Growing Inequality


In a post last week on our “Pulling Apart” report, we noted some major causes of growing inequality.  Here, we look at some steps that states can take to counteract this trend.  States can:

  1. Make their tax systems fairer. States should reform their tax systems so that low-income people no longer pay a larger share of their income in taxes than the wealthy.  For example, states could reduce their reliance on sales taxes (which hit low-income households especially hard) and create or expand tax credits for low-income taxpayers, like the earned income tax credit.  States also should avoid regressive tax cuts that benefit the richest households and do little for poor and middle-income families.
  2. Preserve and strengthen programs that help low-income families work their way into the middle class. States play a major role in delivering assistance in areas such as child care, job training, transportation, and health insurance.  These programs can help poor families get and retain jobs and move up the income scale while shielding the most vulnerable citizens from the long-term effects of poverty.  Ways to strengthen these programs include investing more in work-related activities as part of state TANF programs and streamlining enrollment in work supports such as SNAP (food stamps) and child care so that more eligible people can participate.
  3. Raise, and index, the minimum wage. The purchasing power of the federal minimum wage has shrunk 13 percent since the end of the 1970s due to inflation, and it falls well short of what’s needed to meet a family’s basic needs (especially in states with a high cost of living).  States can respond by enacting a state minimum wage that is above the federal wage and indexing it to inflation to maintain its value.  Some 18 states have state minimum wages, but only ten of them are indexed.
  4. Strengthen unemployment insurance. Unemployment insurance helps keep workers who lose their jobs through no fault of their own from falling into poverty.  Yet in the last two years, seven states — Arkansas, Florida, Georgia, Illinois, Michigan, Missouri, and South Carolina — have cut the maximum number of weeks of regular state unemployment benefits.  These states should restore those cuts.  Other states should build on recent federal and state efforts to fix outmoded rules that bar many unemployed workers from receiving benefits.