Economic statistics show that incomes for the top 1 percent of U.S. households soared 31 percent from 2009 through 2012, after adjusting for inflation, yet inched up an average of 0.4 percent for those making less. Many economists are sounding alarms that the income gap, greater now than at any time since the Depression, is hurting the economy by limiting growth in consumer spending.
Yet those concerns aren't resonating in some states. Last year, at least 10 states passed income tax cuts targeted at businesses or those in the top individual brackets. Several more already have cut taxes this year, including Democratic-led New York and Republican-led Oklahoma. Yet over the past three years, nearly one-fifth of the states have pared back unemployment benefits, and more cutbacks are under consideration.
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The theory is that business owners are more likely to hire, expand and drive economic growth when their own financial burdens are eased. But others contend that formula comes with side effects.
"What's happening at the state level is increasingly important, and, to many eyes, it appears to be moving things in one direction - towards greater inequality," said Matthew Gardner, executive director of the Institute on Taxation and Economic Policy, a Washington-based tax research group.
The once-obscure income gap has become an issue in the 2014 elections as Democrats and Republicans differ over the best way to ensure America fulfills its promise as a land of opportunity.
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Economists point to a variety of factors contributing to the gap, from the shift toward foreign manufacturing to a growth in single-parent households. Federal policies also come into play.
But state governments also have an impact.
Since the mid-1970s, states as a whole have cut their top individual income tax rates by nearly one-fourth, while boosting state sales tax rates by almost half, according to an Associated Press analysis. That has meant lower taxes for those earning the most and a bigger proportionate tax bite for those who spend more of their income on retail sales. Vermont, for example, has cut its top personal income tax rate from 17.5 percent to less than 9 percent while doubling its sales tax rate to 6 percent.
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At the same time, states have scaled back some of the aspects of the financial safety net that keep low-income people out of poverty. The inflation-adjusted value of state welfare payments has been dropping in every state except Maryland and Wyoming and - even with federal food stamps included - leaves recipients below the poverty level in all states.
A divorced mother of three, Amy Jennewein came to the Missouri Capitol earlier this year imploring lawmakers to raise the minimum wage from $7.50 an hour to $10. Instead, the Republican-led Legislature voted to gradually cut the top individual income tax rate from 6 percent to 5.5 percent and referred a three-quarters cent sales tax increase to the ballot. It also curbed unemployment benefits.