Missouri State Senate Considers Replacing State Income Tax With Higher, Broader Sales Tax. Kentucky Ought To Try It, Too.
Missouri Senate considers replacing state income tax with higher, broader sales tax
By JASON NOBLE
JEFFERSON CITY | The Missouri Senate opened debate Thursday on a bill to replace the state’s income tax with a higher and broader sales tax.
The bill would phase out the state income tax over a five-year period, beginning in 2013. In its place, the state sales tax would be expanded to include services and raised to as much as 7 percent.
The measure also would require consumers to pay tax for currently untaxed services such as child care and legal work, and also eliminate dozens of exemptions now in place on items such as food and prescription drugs.
Although it is sponsored by Sen. Chuck Purgason, a Caulfield Republican, its biggest booster is Rex Sinquefield, a retired investor who has poured millions of dollars in recent years into GOP candidates and libertarian causes in Missouri. He also is bankrolling a campaign to reconsider the earnings taxes levied in Kansas City and St. Louis.
Proponents maintain that the tax change would ignite business growth in the state and empower citizens by tying their tax burden to consumption rather than income.
“If we did this right,” said Sen. Luann Ridgeway, a Smithville Republican, “it could become the most important — and probably the most dramatic — chance for economic activity and job growth the state of Missouri has ever seen.”
But Senate President Pro Tem Charlie Shields, a St. Joseph Republican, said the measure was unlikely to pass.
“When we bring it out the next time, I think you’ll see a flood of amendments out there designed to start chipping away at those exemptions,” Shields said.
Opponents maintain that a broader sales tax would disproportionately affect poor and middle-class residents and drive consumers to shop across state lines.
Concerns also have been raised about the sales-tax increase that might be necessary to keep state revenue at the same level collected through the income tax. And because the legislation introduced Thursday would cap the sales-tax rate at 7 percent, critics say it could leave the state underfunded and with no remedy to raise revenue.
“This legislation will not only prevent Missouri from collecting enough revenue to fund programs at their current decreased levels, but will likely result in dire budget cuts to services, infrastructure and education in Missouri,” Amy Blouin, director of the Missouri Budget Project, said in a statement.
Blouin’s group analyzes state finances and advocates for social services to the poor.
Under the proposal:
•In 2013, the franchise and corporate income tax would be eliminated, and there would be a 20 percent reduction in the individual income tax. The individual income tax would then be gradually reduced to zero over the next four years.
•The sales tax would be expanded to include services as well as goods in 2013, and gradually raised through 2017.
•Motor fuel, insurance, education, charitable donations and purchases made with food stamps would be exempt.
Missouri’s sales tax is 4.225 percent and generated $1.9 billion in 2009. Most communities also have sales taxes.
Lawmakers took no action Thursday. The legislation would change the state constitution, meaning that if it is passed by lawmakers, it will face a statewide vote.
Outside the Capitol on Thursday, about 100 people affiliated with Mexico, Mo.-based Grass Roots Organizing protested the sales-tax proposal and Sinquefield’s perceived influence. They said lower-income residents would be hit harder by the higher sales tax because it would eat up a larger portion of their money.
“We need an economy that’s going to work for all of us,” said protester Myra Lewis.
The Associated Press contributed to this report. To reach Jason Noble, call 573-634-3565 or send e-mail to jnoble@kcstar.com.
By JASON NOBLE
JEFFERSON CITY | The Missouri Senate opened debate Thursday on a bill to replace the state’s income tax with a higher and broader sales tax.
The bill would phase out the state income tax over a five-year period, beginning in 2013. In its place, the state sales tax would be expanded to include services and raised to as much as 7 percent.
The measure also would require consumers to pay tax for currently untaxed services such as child care and legal work, and also eliminate dozens of exemptions now in place on items such as food and prescription drugs.
Although it is sponsored by Sen. Chuck Purgason, a Caulfield Republican, its biggest booster is Rex Sinquefield, a retired investor who has poured millions of dollars in recent years into GOP candidates and libertarian causes in Missouri. He also is bankrolling a campaign to reconsider the earnings taxes levied in Kansas City and St. Louis.
Proponents maintain that the tax change would ignite business growth in the state and empower citizens by tying their tax burden to consumption rather than income.
“If we did this right,” said Sen. Luann Ridgeway, a Smithville Republican, “it could become the most important — and probably the most dramatic — chance for economic activity and job growth the state of Missouri has ever seen.”
But Senate President Pro Tem Charlie Shields, a St. Joseph Republican, said the measure was unlikely to pass.
“When we bring it out the next time, I think you’ll see a flood of amendments out there designed to start chipping away at those exemptions,” Shields said.
Opponents maintain that a broader sales tax would disproportionately affect poor and middle-class residents and drive consumers to shop across state lines.
Concerns also have been raised about the sales-tax increase that might be necessary to keep state revenue at the same level collected through the income tax. And because the legislation introduced Thursday would cap the sales-tax rate at 7 percent, critics say it could leave the state underfunded and with no remedy to raise revenue.
“This legislation will not only prevent Missouri from collecting enough revenue to fund programs at their current decreased levels, but will likely result in dire budget cuts to services, infrastructure and education in Missouri,” Amy Blouin, director of the Missouri Budget Project, said in a statement.
Blouin’s group analyzes state finances and advocates for social services to the poor.
Under the proposal:
•In 2013, the franchise and corporate income tax would be eliminated, and there would be a 20 percent reduction in the individual income tax. The individual income tax would then be gradually reduced to zero over the next four years.
•The sales tax would be expanded to include services as well as goods in 2013, and gradually raised through 2017.
•Motor fuel, insurance, education, charitable donations and purchases made with food stamps would be exempt.
Missouri’s sales tax is 4.225 percent and generated $1.9 billion in 2009. Most communities also have sales taxes.
Lawmakers took no action Thursday. The legislation would change the state constitution, meaning that if it is passed by lawmakers, it will face a statewide vote.
Outside the Capitol on Thursday, about 100 people affiliated with Mexico, Mo.-based Grass Roots Organizing protested the sales-tax proposal and Sinquefield’s perceived influence. They said lower-income residents would be hit harder by the higher sales tax because it would eat up a larger portion of their money.
“We need an economy that’s going to work for all of us,” said protester Myra Lewis.
The Associated Press contributed to this report. To reach Jason Noble, call 573-634-3565 or send e-mail to jnoble@kcstar.com.
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