Tax Changes Recommended
by Missourians for Tax Justice

Missouri has three major sources of state revenue: 1) the individual income tax, 2) the sales tax, and 3) federal funds.

Changes are needed in the laws for our sales tax and individual income tax so that the burden of who pays these taxes falls more equitably on those best able to pay.

SALES TAX in Missouri is imposed on necessities - even food - but fails to tax services purchased largely by people with high income. The state also loses revenue from sales tax exemptions and income tax credits that benefit special interests.

A law passed in 1993 (Senate Bill 380) made the INDIVIDUAL INCOME TAX somewhat more progressive by limiting the amount of federal taxes one may deduct when calculating the state income tax owed. The resulting tax increase fell on only the TOP 10% of state income tax payers.

MTJ worked for, and supports, the fair tax provisions of this 1993 law.

The structure of our state individual income tax, however, remains terribly outdated. Brackets are graduated only up to $9,000. Above that amount, all taxable income is taxed at the same rate. The $9,000 figure was set in 1931. The brackets and rates were set in 1971.

For corporations, the 1993 law limited federal tax deductions on the state corporate income tax to 50% of state taxable income, and increased a flat 5% tax rate to 6.25%. Still, Missouri's corporate income tax rate is among the lowest in the country.

These examples suggest some areas where improvement is needed in Missouri's tax system.

During the 1997 Session of the Missouri Legislature, MTJ worked for passage of a reduction in the state sales tax on food. A bill to exempt food from the three cents state general sales tax was enacted and went into effect on October 1, 1997. However, food is not exempt from any of the local sales taxes (those enacted by cities, municipalities and counties). And, some special state sales taxes remain on food. These are the one cent Education sales tax, the one-eighth cent Conservation sales tax and the one-tenth cent Parks, Soils and Water Conservation sales tax.

MTJ believes that food, as a necessity for everyone, should be exempt from ALL sales tax.

Because the sales tax on prescription medicine came to be considered as a "tax on illness," Missouri exempted prescription drugs from all sales tax in 1978. Some people have called the sales tax on food a "tax on hunger."

Purchases of food produce a lot of sales tax revenue. More and more, our cities are turning to revenue from sales tax to pay for city services. Since they are hooked on sales tax, cities and others dependent on sales tax revenue will strongly oppose eliminating the local sales tax on food.

The common sense answer to this problem is to provide an alternative source of revenue for local governments to replace the dollars lost from the food tax exemption. This is Missourians for Tax Justice's recommendation. Bills backed by MTJ in the last four sessions of the legislature (1999 - 2003) provided for a fair and sound means to replace the local revenue.

MTJ supports TOTAL elimination of the sales tax on food in Missouri. This is a priority item in MTJ's present agenda, but in 2006 the first priority must be restructuring our outdated, inequitable and inadequate tax system so it can produce equitable revenue to meet Missourians' needs. MTJ strongly supports the Tax Justice for a Healthy Missouri campaign whose goal is to accomplish this. The cuts to education, health care and other needed services over the past 5 years should make this everyone's priority.

MTJ is also greatly concerned about the present tendency to turn to the regressive sales tax whenever more revenue is needed for anything at both the state and local level. We are asking citizens to join a SALES TAX REVOLT.

MTJ now has a standing policy of opposition to ANY state or local sales tax increase.

Let us know what you think!