Tax Analysts Blog

Indexing the State Income Tax Brackets Makes Sense

Posted on Dec 4, 2013

Missouri Rep Paul Curtman (R) wants to index his state’s income tax brackets to inflation. Of all the tax ideas presented this year, this is among the best. Missouri imposes its top rate of 6 percent on all incomes over $9,000. Nine grand was a lot of money in 1931 – and the top tax rate was aimed at the very wealthiest Missourians. But that threshold hasn't changed since Herbert Hoover was president. Think about that. And think about the difference between a top bracket of $9,000 in 1931 and a top bracket of $9,000 in 2013. Adjusted for inflation, that top rate would be about $140,000 today. Obviously the Missouri of your grandparents was a heck of a lot more progressive than it is today. Indeed, the top rate in Missouri kicks in at below the poverty level. That is hardly fair.

Why hasn’t the top rate changed? Missouri doesn't index its brackets to inflation. So the state would have to periodically adjust the brackets – which it hasn't done. Missouri is not alone in failing to index its brackets or in imposing income taxes on the poorest citizens. Alabama, Georgia, and Oklahoma all tax incomes lower than Missouri does. That is an abomination since the income tax is easily adjusted to provide relief to low income taxpayers. According to the Tax Foundation, 19 states do not index their brackets. Without indexing, people continually get foisted into higher brackets through inflation. There is nothing fair or just about that. This is an area in which conservatives and liberals should find common ground.

Read Comments (2)

emsig beobachterDec 5, 2013

The brackets, Personal exemption allowances, and standard deductions should be
indexed as well.

David BrunoriDec 10, 2013

emsig, true,true, true.

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