The failure of Missouri's outdated tax table

thumb_JMO 2012.jpgBy Jeanette Mott Oxford, Executive Director of Missouri Association for Social Welfare

It’s 1931. A loaf of bread costs 8 cents, and 45 cents is the price tag on a gallon of milk. The average new car can be purchased for $640. Cab Calloway’s “Minnie the Moocher” makes history as the first million-seller jazz record, and “The Star Spangled Banner” is officially named the U.S. national anthem. Babe Ruth hits his 600th home run.

That same year, Missouri establishes its graduated tax table. Yes, the one we STILL use.

Here's a brief history of Missouri’s tax system. Missouri began collecting an income tax during the Civil War. This morphed into a flat tax of .5-percent of net income beginning in 1917.

Then in 1931, a graduated scale was introduced, reflecting progressivity; that is, the tax rate was directly linked to one’s ability to pay, with the percentage rate rising with income. The top tax bracket, then at 4 percent (raised to 6 percent in the 1970s), was set to begin at $9,000, a sizable income in 1931. In 2013 terms, $9,000 from 1931 has more than $128,000 in purchasing power.

By not updating its tax table for modern economic realities, Missouri no longer has a progressive income tax. Instead we have a flat tax for the majority of our tax payers, with a small and ineffective graduated scale for wage-earners living in poverty and those just above them.

How does the failure to update our tax table hurt Missouri?

  1. The current system is unfair. When combined with the regressive impact of sales, excise and property taxes, and some federal rules that benefit the wealthier, Missouri taxpayers with low incomes currently pay an unfair share of their incomes as state and local taxes. According to the “Who Pays?” analysis of the Institute for Taxation and Economic Policy (pdf), households with incomes of less than $50,000 annually pay 9 percent or more of their incomes on average in state and local taxes. Contrast this with the 5.4 percent paid by the wealthiest one percent of Missouri households, a group with an average annual income of $941,100.
  2. The current system is inadequate. If Missouri’s tax system is to be sustainable, it must yield revenue that grows at the same pace as the services it is intended to fund. Growing populations and growing economies require adequate investment. To achieve that aim, taxes then must reflect the broad economic developments that affect the base on which they are levied. Keeping Missouri’s tax table frozen in its 1931 form ignores the tremendously unequal growth in incomes that has characterized the last three decades. A truly progressive tax linked to today’s incomes and costs of living is the key to fully fund K-12 and higher education, mental health, courts, public safety, mass transit, and other essential needs chronically underfunded by the General Assembly.

A tax system that is more modern, adequate and fair is possible, but only if we demand it. Find out how by joining the Economic Justice Task Force of the Missouri Association for Social Welfare.


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