The Missouri Budget Project is pointing to a nationwide report put out by the Center on Budget and Policy Priorities in D-C that says Missouri’s income tax bracket was established in 19-31.

Executive Director Amy Blouin says the current structure penalizes the poor and hurts the state’s overall economy.

She says Kansas, Iowa, and other surrounding states have updated their income and sales tax policies, and their unemployment rates are nearly half of what Missouri’s are. Blouin says Kansas is a good model that Missouri should follow.

“Some critical reform proposals are before the state legislature,” she says, such as a streamlined sales tax, “which would allow Missouri to capture lost sales taxes from internet purchases.”

“Missouri was of only 11 states to set an income tax threshold (the amount of income at which a family begins facing an income tax liability) below the poverty level for a family of three, and one of only 13 states to do so for a family of four,” Mo. Budget Project states.

Their data shows that single working parents with two children, earning $14,400 or more in Missouri, were subject to the income tax. The poverty line for this type of family was $17,102 in 2009. A married couple with two children pays income tax if the household salary is $18,100 or more, well below the 2009 poverty level of $21,947 annually. The average income tax threshold nationwide in 2009 was $22,000 for a family of three – or $4,898 above the poverty level – and $26,300 for a family of four, which is $4,353 above the poverty level.

When Missouri’s income tax brackets were established in 1931 — and not updated since — the result, all Missourians who earn at least $9,000 of adjusted gross income per year are taxed at the same rate of 6 percent, no matter how high or low their income is, Blouin reports.

“Our drastically outdated tax brackets, which levy taxes on working families below the poverty line, are just one example of the need to reform Missouri’s tax structure,” she says. “We should modernize our tax system to maintain the services Missourians need and enhance our state’s economic potential.”

The Mo. Budget Project realizes Missouri is facing significant budget shortfalls for the current and upcoming fiscal years and says the state’s budget challenges are too large to be solved by cuts alone.

“We need balanced, common sense solutions that begin with reforms to Missouri’s tax structure, which would help to plug the holes and modernize our system,” Blouin says. “Some critical reform proposals are currently before the state legislature, including the streamlined sales tax, which would allow Missouri to capture lost sales taxes from internet purchases. In addition, proposals to close corporate tax loopholes and reform tax credits could make a significant difference for our state’s ability to fund services that benefit all Missourians.”