Last month, I attended a meeting in Jeff City of Missourians for Tax Justice and received a brochure with a section describing the changes in our tax code that they deem necessary and fair. It’s as good a brief summary of the tax issues in Missouri as you’ll find:
The two major sources of state revenue are the individual income tax and the sales tax. Changes are needed in each so the tax burden falls more equitably on those most able to pay.
The structure of our individual state income tax is badly outdated. Brackets are graduated only up to $9,000. Above that amount all taxable income is taxed at the same 6% rate. The $9,000 figure was set in 1931; the brackets and rates were set in 1971. The on-going shortfall of funds for essential needs can be cured by updating our income tax. This is the logical way to raise the revenue to fund services Missourians need.
A 1993 law made the individual income tax somewhat more progressive by limiting the federal tax deduction on the state income tax. This tax increase to fund schools affected only the top 10% of income tax payers.
The sales tax is imposed on necessities but fails to tax services purchased largely by high income persons. The state also loses large amounts of revenue from sales tax exemptions and income tax credits that benefit special interests.
In 1997, Missourians for Tax Justice organized statewide grassroots support for the permanent exemption of food from the state’s three cents sales tax. This bill passed almost unanimously, due to citizens’ demands. But some state sales tax and all local sales tax on food remains. MTJ supports the elimination of all sales tax on food.
Missouri and its local governments are too dependent on sales taxes for needed revenue. This overuse of the regressive sales tax, along with our out-dated income tax structure, add up to a tax system that overburdens low-and-moderate-income taxpayers and does not require a fair share from high-income taxpayers. MTJ urges citizens to join a sales tax revolt and vote against all sales tax increases.
Missouri’s 6.25% corporate income tax rate is among the lowest in the country. Due to tax loopholes, many corporations pay less than that–or nothing. This tax produces less than 2.8% of the state’s revenue for FY2008.
Plenty of food for thought there, no? And our chances of making any of the recommended changes with a Republican legislature and governor range from none to less than that. That’s another reason we’ve got to take at least eleven new House seats this fall, elect Jay Nixon, and at least make some serious inroads into the Republican majority in the Senate.