How fair are Arizona's taxes?

A breakdown of what a fair tax system would demand of taxpayers in different income brackets, according to one survey. (SPARKY KNOWLTON/Miner)

A breakdown of what a fair tax system would demand of taxpayers in different income brackets, according to one survey. (SPARKY KNOWLTON/Miner)

KINGMAN - Tax policy becomes a hot-button issue as the 2016 election rhetoric heats up, and politicians are sure to make their usual promises of fair taxation and leaving more money in the pockets of taxpayers.

But what does a fair tax system look like, and which states actually have the fairest tax systems?

Not Arizona, according to a study from WalletHub.com.

Arizona was ranked No. 41, between Ohio and Indiana, based on the fairness of income taxes, sales and excise taxes, and property taxes.

Tax systems vary dramatically across states and localities, WalletHub analyst Jill Gonzalez noted. Some states don't have a sales tax, while others don't have a state income tax. Many families face high property tax burdens, whereas others enjoy generous tax credits.

"One of the biggest contributing factors here was it [Arizona] ranked 10th-most dependent on sales and excise taxes," Gonzalez told the Daily Miner. "States that rely more heavily on these type of taxes tend to be less fair for poor and middle-class families."

She said Arizona is the seventh-worst state when it comes to overtaxing the poor, or the bottom 20 percent of income brackets, who send about 12.5 percent of their income to state and local taxes. The top 1 percent of wage earners is taxed 4.6 percent.

"Our survey has shown that both liberals and conservatives agree a progressive tax system is what they consider fair - the exact opposite of what's occurring in America," Gonzalez said.

State Sen. Kelli Ward, R-Lake Havasu City, said the fairest tax system is a "proportional" tax system in which everyone pays the same percentage of income tax as possible. It's better than a "progressive" tax because it applies to everyone and does not penalize people who earn more income, she said.

"I am a believer in low taxes and I'm not a fan of the income tax," Ward said. "Arizona can make our tax structure fairer by making it flatter. There is nothing unfair about some people earning more than others, as long as they earn it honestly and legally.

"Some people believe that it would be more fair to raise taxes on the rich. History has proven that such a change doesn't work and slows economic growth. We want growth in Arizona."

What is most fair is creating more jobs with rapidly growing wages, incomes and prosperity for all, Ward said.

In ranking state tax fairness, WalletHub used results from a national online survey of 1,050 individuals to assess what Americans think a "fair" state and local tax system looks like. They were presented with 10 different income levels ranging from $5,000 to $2.5 million and asked to give a percentage between 0 and 25 that they think would be a fair tax for each income bracket.

Analysts compared public perception to data on the real tax structure in all 50 states.

The top 10 tax fairness states were: 1) Montana; 2) Oregon; 3) South Carolina; 4) Delaware; 5) Idaho; 6) Minnesota; 7) Utah; 8) Virginia; 9) Colorado; and 10) Maryland.

The bottom 10 states were: 41) Arizona; 42) Indiana; 43) Texas; 44) Mississippi; 45) Florida; 46) Illinois; 47) Arkansas; 48) Hawaii; 49) Georgia; and 50) Washington.

One thing was clear from the survey: Most Americans think "fair" state and local tax systems impose higher taxes on higher-income households than on lower-income households.

When asked what they thought was fair, answers ranged from a low of 2.5 percent tax for households earning $5,000 a year to a high of 16.4 percent for households making $2.5 million a year.

Other key findings from the survey:

• The poor are most overtaxed in Washington, Hawaii and Illinois; the wealthiest 1 percent are most undertaxed in Wyoming, Nevada and Florida.

• The middle class is most overtaxed in Arkansas, New York and Mississippi.

• Conservatives and liberals generally agree on what a "fair" tax system looks like. However, conservatives are more supportive of slightly higher taxes on the poor and lower taxes on the wealthy.

• Current state and local tax systems are, on average, extremely unfair. While most Americans - both liberals and conservatives - think a progressive tax system is most fair, virtually every state has regressive state and local tax structures.

• Both "blue" states and "red" states are found to overtax the poor and undertax the rich, relative to what most Americans consider "fair."