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States Must Address Growing Inequality

States can take many steps to push back against the growing inequality that I described yesterday.  We’ve identified these three policies that they can adopt:

  1. Make state 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 rely less 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.  They should maintain and increase their investments in programs that help poor families get and keep jobs and move up the income scale while shielding the most vulnerable Americans from poverty’s long-term effects.  
  3. Raise the minimum wage.  The purchasing power of the federal minimum wage has fallen well below its 1968 peak due to inflation, and it’s far short of what families need to meet their basic needs (especially in states with a high cost of living).  States can respond by enacting a state minimum wage that’s above the federal wage.

You can find more information on these and other state policies to promote broadly shared prosperity in our report, A Fiscal Policy Agenda for Stronger State Economies