New CBP Analysis: What Makes a Tax System “Fair”?

The issue of fairness in the tax system is the topic of continued discussion and interest among policymakers, families and individuals, businesses, and the media, but there is little consensus as to what specifically constitutes a “fair” or equitable tax system. A new CBP analysis looks at the idea of “fairness” in taxes: what economists believe makes a tax system fair, how fair our state’s tax system is, and why fairness matters.

This CBP analysis shows that California’s tax system is modestly regressive after taking into account taxpayers’ ability to deduct state income and property taxes for federal income tax purposes. This means that lower-income households pay a larger share of their incomes in taxes than higher-income households do. The report also explains which taxes within California’s tax system are regressive, such as sales and excise taxes and the Vehicle License Fee, and which are progressive, such as the income tax. The analysis briefly discusses the characteristics of a good tax system: that it provides an appropriate level of revenue on a timely basis, distributes the cost of taxation fairly, promotes economic growth and efficiency, can be easily administered, and ensures accountability.

— Steven Bliss