Group seeks to swap Missouri income tax for sales tax
Saturday, January 8, 2011
Supporters of replacing Missouri’s income tax with an expanded sales tax took their first step Friday toward getting the idea to voters by filing proposals with the secretary of state’s office.
Backers submitted nine versions of a proposed constitutional amendment that could appear before voters in the November 2012 election. They generally would phase out income taxes while levying a state sales tax on more purchases. The sales tax would be capped at 7 percent and would cover goods and many services.
Missouri currently has a 4.225 percent state sales tax. Of that, 3 percent is for general state revenue and 1.225 percent is for dedicated purposes such as conservation, education and state parks.
Local governments also can levy sales taxes, including taxes earmarked for transportation and capital improvements.
For example, Cole County’s current total tax rate, including the state’s taxes, is 5.725 percent, according to the state Revenue Department.
Jefferson City’s current local sales tax is 7.725 percent, while Holts Summit charges an 8.725 percent total, and Columbia has a 7.350 percent total rate.
Where a transportation development district exists — such as the Kohl’s and east-side Walmart projects — the sales tax can be as much as 1 percent higher.
To get a constitutional amendment on the ballot, supporters must collect signatures from two-thirds of the state’s congressional districts equaling 8 percent of the votes cast in the 2008 gubernatorial election. That amounts to between about 146,000 and 160,000 signatures depending upon which congressional districts are targeted. Before signatures are gathered, state officials must develop a ballot summary and cost estimate.
The income tax constitutional amendment is supported by the same group behind a measure approved by voters last year to ban new cities from enacting an earnings tax and to require St. Louis and Kansas City to hold regular votes on their existing earnings tax. That group received more than $11.2 million in financial support from retired businessman Rex Sinquefield.
Travis Brown, the group’s president, said Friday replacing the income tax with a sales tax would help create jobs, promote economic development and make state revenue less volatile. Brown said Missouri could add thousands of new jobs per year by changing its tax policies.
“We all want a better economy and a more dynamic base for jobs,” Brown said. “We know that states that don’t have income taxes are out-performing our state. We want a responsible way to transition from what we have to a more positive economic future.”
Critics warn that it could hurt the middle-class and force cuts to government services.
“Every state without an income tax has other forms of reliable revenue that our state would not have under this proposal,” said Amy Blouin, the executive director for the Missouri Budget Project. “This experiment has never been tested, and Missouri should not risk its future on untested economic theories.”
The Missouri Budget Project analyzes budget and spending decisions for their effect on the poor. The group contends that Missouri would need to start levying a sales tax on many purchases such as child care, nursing homes and legal counseling to offset revenue lost by eliminating the income tax. The group estimates the sales tax would need to be set at between 10 percent and 11 percent to offset revenue lost by eliminating the income tax.
Other critics have said the sales tax rate might have to be even higher, and would be imposed on services that now are not taxed, including automobile service work, doctors’ visits and prescription drugs.
House Speaker Steven Tilley, R-Perryville, has said that he supports replacing the income tax with a higher sales tax. And Missouri lawmakers in recent years have considered proposals to replace the income tax with a broader sales tax. The House has voted for it, but it has not won approval in the Senate.
In 2009, lawmakers, nationally syndicated radio host Neal Boortz and others held a rally at the Boone County Fairgrounds in central Missouri and called for state and federal income taxes to be replaced with higher sales taxes.
Ballot measure supporters said they have not yet decided which of the nine versions of the proposed constitutional amendment to pursue.
Some versions repeal the individual income tax, while others would also eliminate corporate taxes. The versions have different phase-in periods for eliminating the income tax. For example, one would repeal the income tax in 2014, and others would phase it out over several years.
As with the earnings tax proposal last fall, the petitions filed with the secretary of state’s office show Cole County Presiding Commissioner Marc Ellinger — who also is a lawyer and CPA — as “the primary contact for this Initiative Petition.”
He did not return a message Friday night seeking his comment for this story.
Bob Watson of the News Tribune staff contributed information used in this story.
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