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A report by the Institute on Taxation and Economic Policy estimates states and local taxes paid by income group.  It shows that lower income families in Mississippi pay more taxes as a percent of income than higher income families.   The estimates include income, property, sales and excise taxes.  The difference is even greater when you consider that many high income earners deduct the amount of state taxes paid on their federal income taxes.

In Mississippi, low income families pay more because of our high reliance on the sales tax.   Because the sales tax charges the same rate regardless of income (unlike the income tax), low income families end up paying more as percentage of income than higher income families.  This is magnified by the fact that Mississippi levies its full sales tax on groceries—a necessity for families that only one other state fully taxes.

Also, while Mississippi’s income tax is designed so that higher income earners pay a higher rate than lower income earners, it is mostly flat.  The highest income tax bracket starts at only $10,000 of taxable income.  With standard exemptions and deductions this means that a family of four earning $30,000 pays taxes in the same bracket as a family earning $3,000,000.

Some ways that the state tax system can become more balanced is to exempt groceries from the sales tax, increase the number of services in the sales tax base, enact a state Earned Income Tax Credit, and add new tax brackets for higher income earners.  Changes to the tax system should both improve the balance of the system and ensure that the revenue collected is adequate to fund the state services that ensure that our state is a good place to live and work.  More information about the state’s tax system can be found in our report The Nuts and Bolts of the Mississippi Budget.