New MU Extension publications examine state taxes, spending

“I find there is a lot of misinformation about government, especially about taxes and expenditures,” said Judy Stallmann, a University of Missouri professor of agricultural economics. “No matter where you go around the country, people talk about how high their taxes are.

“At the same time, they will complain that the government is not spending enough on something they think is important,” she added.

Stallmann, who recently testified before the General Assembly’s Joint Committee on Tax Policy, analyzed information from the 2002 Census of Governments and found that Missouri ranks relatively low in both taxes and expenditures.

Her work is summarized in two new publications “Missouri State and Local Taxes and Revenues: A Fifty-State Comparison for 2002,” and “Missouri State and Local Spending: A Fifty-State Comparison for 2002,” available from MU Extension.

“These publications are intended to show how states compare to one another on taxes and revenues, and how they compare on the services they provide,” she said. “I have done this in other states, and people have found them useful information for being able to have some facts when they talk about taxes and the services governments provide.”

In 2002, Missouri ranked 35th in state and local taxes per capita with the average person paying $2,667 in taxes. The national average was $3,149.

Stallmann also looked at taxes in relation to personal income, finding that on average, 9.52 percent of the state’s personal income was paid in taxes, placing 42nd among all states.

Sales taxes accounted for just under half of the taxes paid by Missourians. In 2002, sales tax was 3.8 percent of personal income or $1,066 per capita, just under the national average of $1,127.

Individually, the actual percentage of income paid in any form of taxes is known as the “tax effort” or “tax burden,” Stallmann said.

Missouri’s mix of state and local taxes results in a regressive tax system, she said, meaning people with low incomes pay a greater percentage of that income in taxes.

In 2002, Missouri’s non-elderly low-income families paid about 9.9 percent of their income in state and local taxes, while the wealthiest families paid 8.8 percent.

Because states differ in how they classify revenues, Stallmann looked at a variety of taxes, as well as other fees and charges. One example of those differences is Alabama, which was 48th in taxes but first in fees and charges, Stallmann said.

Texas is another example. “Texas always features the fact that it doesn’t have a corporate income tax, but it does have a corporate franchise tax, which is substantial,” Stallmann said.

When corporate income and franchise taxes are combined, Texas ranked 21st and Missouri 38th, she said.

Missouri also ranks low when it comes to expenditures. State and local governments spent $5,827 per capita in Missouri, ranking it 45th in the nation. Arkansas was the lowest, spending $5,384 per resident. Alaska had the highest per capita expenditures, $14,661 in 2002.

The biggest expenditure for both state and local governments is education, accounting for about 32 percent of public spending in Missouri, she said. The state ranked 37th nationally, spending $207 less than the national average of $2,098 per capita.

Missouri had that nation’s lowest expenditures for administrative overhead and miscellaneous expenditures, which include the General Assembly, the courts, tax collection and assessment, auditing, and maintenance of public buildings. State and local governments spent just more than six percent of their budgets on these expenses, Stallmann said.

Missouri’s low ranking can be attributed to its status as a low-tax state and to having the 17th largest population in the country, she said.

“No matter which way we measure it, Missouri ranks low on taxes and expenditures,” she said.

The publications, MP742, “Missouri State and Local Spending: A Fifty-State Comparison for 2002” and MP743, “Missouri State and Local Taxes and Revenues: A Fifty-State Comparison for 2002” are only available online at: http://extension.missouri.edu.