Burdening the Poor

Mississippi's low-income families pay a higher percentage of their income on taxes than people with higher incomes, one reason that makes the state's tax system mostly regressive. That is the conclusion of "Putting the Pieces Together: A Taxpayer's Guide to the Mississippi Budget," a new report from the Mississippi Economic Policy Center, an independent, nonpartisan initiative whose purpose is to analyze issues that affect working families and low-wealth Mississippians.

State taxes and fees will generate roughly half the funding of Mississippi's $17.4 billion 2008 budget appropriations, with federal funding making up for the other half. Most of the funds generated in-state come from sales and use taxes, 54 percent in 2006. For low-income families, paying taxes on groceries is unavoidable, which pushes their tax contribution to 10 percent of their income for the state's lowest 20 percent of wage earners (who earn an average of $7,000 annually), and 11.5 percent for those earning $15,100. Some working families below the federal poverty line of $20,615 are also subject to state income tax, because legislators have not adjusted the state's tax threshold for inflation to keep up with federal guidelines.

For the top 20 percent of wage earners—those earning more than $103,400—their contribution to sales and use taxes drops to 7 percent. In addition, while mildly progressive, according to the report, Mississippi's personal income tax puts a family of four making $250,000 a year in the same top tax bracket as families who earn $30,000: 5 percent.

For corporate citizens, Mississippi offers a range of tax incentives to stimulate economic development, but only reports on the effectiveness of some of the programs. For example, corporations will take an estimated $22 million in jobs tax credits in 2007, yet there is no way to estimate the number of jobs created through the credits because of the reporting structure of the tax filing system. The MEPC report concludes that publicly available information would improve the accountability and effectiveness of the program.

The report, available online at the MS Economic Policy Center's website, is a concise, clear guide to Mississippi's budget process, a detailed look at state spending and revenue, and presents ways for individuals to get involved, in addition to evaluating the current system.


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