Mississippi's tax code may increase income inequality between rich and poor residents. That's according to a report written by a number of economists working with the Federal Reserve. The increase is created in part by the state's reliance on regressive taxes.
Under the federal tax code, wealthier Americans pay higher taxes than the middle class or poor. That system helps close the growing income gap between the rich and everyone else. But, according to research conducted by economists with the Federal Reserve Mississippi's tax code may actually increase income inequality.
David Wessel is with the Brookings Institute -- an economic think-tank based in Washington D-C. He says dependence on regressive taxes, like the state's sales tax on groceries, are likely increasing that income gap.
"In roughly half of the states, the state's policy to use the tax code between rich and poor, and Mississippi is not among those states," says Wessel. "In Mississippi the tax code is making that gap between rich and poor larger. That means there is more inequality in Mississippi after state taxes than there is before it."
Sales taxes made up about 37 percent of the state's total revenue in 2014; the largest source of income for the state. Republican Representative Jeff Smith of Columbus is the Chair of the House Ways and Means Committee. He says the sales tax is perhaps the only state tax some lower income residents will pay.
"About 50-51 percent of Mississippians pay state income tax, and some people the only form of taxation that they would contribute to society is sales tax because everybody generally buys groceries, consumer products," says Smith.
Last year, sales taxes brought in nearly two billion dollars for the state's general fund