Tuesday, April 19, 2011

Mississippi's tax system unfair to poor; is anyone surprised?

The Mississippi Economic Policy Center has a two page PDF up that's rather disturbing. In it, they reveal how the top 20% of Mississippi earners pay the lowest share of taxes.

So how did we get here? Well, for starters, we haven't updated the Mississippi tax code in 25 years. That means that a family of four that pulls in more than $29,600 is in the highest tax bracket. Yes, you read that correctly. Then there's been skyrocketing income growth among the top 20% of income earners as opposed to everyone else. To the point, there has been a 49.4% increase in annual income for the top 20% of earners over the last 20 years, while the bottom 20% has seen their income rise only 23.1%. Factor in that the 49.4% increase for the wealthy is exponentially greater than the 23.1% increase for the poor, and the gap keeps expanding. For example, 49.4% income growth for someone making $100,000 means a new income of $149,400, while a 23.1% income growth for someone making $30,000 is a new salary of $36,930. What was once a $70,000 income gap is now a gap of $112,000. And the kicker? They're both in the same tax bracket.

It is past time for us to examine our tax code and make it current. Doing so would allow us to better fund our state budget and ease the burden on Mississippi's working and middle class. And that would make Mississippi a more attractive place to live, work, and play.


rchhabra said...

Doesn't Mississippi have a 3% 4% and 5% system? So the lowest earners pay 3% of non deductible wages and highest pay 5%? And aren't families of 4 with under $30k in income in the lowest bracket of 3%. and do families with that low of an income even pay state taxes? I'm definitely for over hauling the federal tax code that has been amended too many times and become entirely too complicated in the last 25 years. But the state tax code seems way simpler, fairer and more efficient. What am i missing?

Cottonmouth said...

These numbers are for taxes as a percentage of income, and it includes all state and local taxes, not just state income tax. Not updating the state income tax brackets has the effect of exacerbating the gap in tax burden between the rich and the poor. For instance, everyone pays the same amount of sales tax on an item, but that amount is a greater percentage of income for the poor than it is for the rich. Not having a realistic income tax bracket structure means, as a percentage of income, the poor are guaranteed to spend more in taxes than the rich.

In all likelihood, fixing this problem means I'll have to pay more in taxes. So be it. A large part of the reason we're 50th in everything that matters is because we don't take in enough money to fund government services above a third world standard. In order to make up the difference, we're having to look to the federal government for funding. It's past time we start pulling our own weight.

Anderson said...

1:05: After exemptions, MSians pay 3% on the first $5K, 4% on the second $5K, and 5% thereafter. There is no particularly good reason why people making $40K, $100K, and $250K should all be paying 5%. A flat tax is not "fair," for the reasons Cottonmouth explains: the utility of $1 is different for different income levels.