Analysis: Missouri Tax Policy Dates to Depression

4 years 9 months 3 weeks ago Sunday, November 24 2013 Nov 24, 2013 Sunday, November 24, 2013 4:27:00 PM CST November 24, 2013 in News
By: The Associated Press

JEFFERSON CITY (AP) - The U.S. was in the throes of the Great Depression when Missouri legislators decided to impose a 4 percent tax on personal income over $9,000 as a means of funding state government.

That decision has stood for decades, even as it has become increasingly outdated.

Although Missouri raised its top tax rate to 6 percent in the early 1970s, the top tax bracket has remained fixed at its original Depression-era threshold.

Yet a dollar today - or $9,000 - doesn't carry anywhere near the same buying power that it did when the tax brackets were set in 1931. In fact, Missouri's heftiest income tax rates - once reserved for the well-to-do - now hit people living in poverty.

"In a word, I would describe them as archaic," said state Rep. Paul Curtman, R-Pacific, who wants to index the tax brackets to the annual inflation rate.

The quest to change Missouri's tax brackets has support from both conservative and liberal groups but has remained difficult to accomplish because of the eye-popping cost of catching up with history.

Had Missouri's tax brackets kept pace with inflation, today's top tax rate wouldn't kick in until individuals earned more than $138,283 annually.

Curtman sponsored legislation earlier this year that would have applied the top tax bracket to incomes over $135,900. The bill never made it to the House floor for debate. The reason: it was estimated to reduce taxes by nearly $2.5 billion annually - eliminating about 30 percent of the state's general revenues.

In 2014, Curtman said he plans a more palatable measure that won't attempt to make up for 80 years of inflation in one swoop. His new legislation would keep the $9,000 top tax bracket but start adjusting it annually for inflation.

Almost half the states already adjust their tax brackets for inflation, according to the Tax Foundation, a Washington-based nonprofit group.

But only Alabama, Georgia and Oklahoma set their top tax brackets lower than Missouri. Alabama has the lowest threshold - imposing a 5 percent tax on income over $3,000. Seven other states have flat income taxes, meaning all people pay the same rate regardless of income.

Missouri's tax bracket is particularly complex. A 1.5 percent tax is applied to income of less than $1,000. Then there are eight more incrementally increasing tax rates for incomes between $1,000 and $9,000.

Relatively few people may have earned more than $9,000 in 1931. But most Missourians now surpass that, even when accounting for deductions and other offsets allowed on tax forms. Of the 4.14 million taxpayers who filed returns for 2011, 2.29 million paid the top tax rate on income over $9,000, according to figures from the Missouri Department of Revenue.

"We think the thresholds, in general, should be raised," said Jay Hardenbrook, the public policy director for the Missouri Budget Project, a St. Louis-based nonprofit group that analyzes fiscal issues with a special emphasis on how they affect the poor.

But Hardenbrook added: "While we support increasing the brackets, we don't support basically undercutting the entire state budget."

The Missouri Budget Project wants to offset the revenues lost from a tax-bracket adjustment by generating additional revenues elsewhere, such as by eliminating a state income tax deduction for the amount of federal taxes people pay.

Grow Missouri, a political action committee financed by retired investment firm executive Rex Sinquefield, has filed a proposed initiative for the 2014 ballot that would simplify and shift up the tax brackets while reducing the tax rate.

Under its proposed constitutional amendment, a 3 percent tax would be levied on income below $15,000 for individuals or $30,000 for couples. A tax of 4.9 percent would be levied on all income above those thresholds.

"Missouri has a very outdated, convoluted tax table currently," said Grow Missouri treasurer Aaron Willard. "Going to two instead of 10 (brackets) is just more simplified. It's much easier for people to look at and understand."

Willard estimates that the proposed income tax cut could range from several hundred million dollars to more than $1 billion annually.

The proposal would allow legislators to raise the state sales tax to compensate for the lost income tax revenues. But if lawmakers don't do so, the result could be less revenue available for public schools, prisons and other state services.

 

More News

Grid
List
JEFFERSON CITY - After being inactive for nearly a year, the Missouri Board of Education is launching a search for... More >>
4 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 7:06:00 PM CDT September 19, 2018 in News
COLUMBIA - State Rep. Cheri Toalson Reisch, R-Hallsville, is changing the way she is fundraising after an ethics complaint and... More >>
5 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 6:17:00 PM CDT September 19, 2018 in News
JEFFERSON CITY - The Jefferson City Police Department was on the scene of a double shooting Wednesday afternoon. Police... More >>
5 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 6:00:00 PM CDT September 19, 2018 in News
COLUMBIA – Some people living in Columbia's southside neighborhoods say thieves, using creative technology, are stealing from cars. Haley... More >>
5 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 5:28:00 PM CDT September 19, 2018 in News
COLUMBIA - As Welcome Home marks the first anniversary of its new shelter, a once drug-addicted veteran is artfully finding... More >>
7 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 4:19:00 PM CDT September 19, 2018 in News
FULTON- After the State Auditor's report that more local money could go to domestic violence shelters, one survivor reiterated the... More >>
7 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 3:52:00 PM CDT September 19, 2018 in News
COLUMBIA – Wednesday morning firefighters burned a simulated dorm room burn on the MU campus to show students how quickly... More >>
8 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 3:13:00 PM CDT September 19, 2018 in News
COLE COUNTY – Cole County ended its economic development contract with the Jefferson City Area Chamber of Commerce Tuesday. The... More >>
8 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 2:32:00 PM CDT September 19, 2018 in News
MEXICO - Sen. Claire McCaskill has announced she will oppose Judge Brett Kavanaugh's confirmation to the Supreme Court. McCaskill's... More >>
8 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 2:30:00 PM CDT September 19, 2018 in News
KANSAS CITY (AP) — A former prosecutor and chairman of Missouri's Democratic Party has been sentenced to two years and... More >>
9 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 1:55:00 PM CDT September 19, 2018 in Top Stories
COLUMBIA - The Columbia Fire Department ruled a Wednesday morning fire as suspicious. There were no injuries, but the... More >>
9 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 1:28:00 PM CDT September 19, 2018 in News
COLUMBIA - As rivers are still rising in the aftermath of Hurricane Florence, donations are also flooding in. However,... More >>
10 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 1:01:00 PM CDT September 19, 2018 in News
SEDALIA (AP) — A Kansas City man has pleaded guilty in the fatal shooting of another man at a trailer... More >>
10 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 12:51:00 PM CDT September 19, 2018 in Top Stories
JEFFERSON CITY (AP) — The search for Missouri's next top education official has begun. The State Board of Education... More >>
11 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 11:24:10 AM CDT September 19, 2018 in News
FULTON - UPDATE: Police have found the two boys who escaped from the Division of Youth Services. Police said... More >>
12 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 10:38:00 AM CDT September 19, 2018 in Top Stories
HOWARD COUNTY - Two people are dead and two others injured after a crash on Highway 87 Tuesday afternoon. ... More >>
13 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 9:51:00 AM CDT September 19, 2018 in News
COOPER COUNTY - Anthony Martin died in a crash in Cooper County on Sunday after losing control of his motorcycle.... More >>
16 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 6:57:00 AM CDT September 19, 2018 in News
CAMDEN COUNTY - A Columbia woman was taken to the Lake Regional Hospital on Sunday after a crash involving a... More >>
16 hours ago Wednesday, September 19 2018 Sep 19, 2018 Wednesday, September 19, 2018 6:39:00 AM CDT September 19, 2018 in News
Columbia, MO
Broken Clouds 78°
12am 78°
1am 78°
2am 78°
3am 76°