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Occidental Petroleum Corporation (OXY), EOG Resources Inc (EOG): These Six States Tax the Poor the Hardest

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Tax fairness has become a hot-button issue, with a big debate over whether the rich and the poor pay their fair share of federal taxes. But at the state level, many states have tax structures that make poor people pay a far greater percentage of their incomes in taxes than those who are better off.

Back in January, the Institute on Taxation & Economic Policy released an analysis (opens  a PDF) of the tax systems in all 50 states, with the goal of figuring out how different groups of taxpayers fared under each state’s tax laws. What it found was that when you divide people into groups by income, the poorest 20% paid more than 11% of their income in taxes on average, compared with just half that rate for the wealthiest 1%.

But in many states, the poor paid even higher taxes. Let’s look at the six states that the Institute on Taxation & Economic Policy identified as taxing the poor the hardest.

6. Texas
Texas imposes taxes on the poor equal to 12.6% of their income, compared with just 3.2% in tax on its wealthiest taxpayers. Like many of the states on this list, Texas doesn’t have an income tax, relying instead on more regressive sales taxes of 6.25% statewide, with an average of 1.89% added on for local taxes. Oil revenue does play a major role in funding state government, with Occidental Petroleum Corporation (NYSE:OXY) and EOG Resources Inc (NYSE:EOG) far outpacing their peers in total oil production during 2012. But that doesn’t keep the state from ranking in the top 30% of states for sales-tax collections, hitting the poor especially hard.

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