Emery renews call for eliminating state income taxes

He knows it's not a high priority for some Missouri lawmakers.

But state Sen. Ed Emery, R-Lamar, still thinks the General Assembly should ask voters to eliminate the income tax and raise the sales tax to a maximum of 7 percent for all state taxes, and no more than 10 percent for state and local taxes combined.

"The intent of this is to be revenue neutral," Emery told the Senate's Ways and Means Committee last week.

Missouri currently imposes up to a 6 percent tax on adjusted gross income. Under Emery's proposed constitutional amendment, that tax would drop to 3 percent after voters approved the amendment, and drop to zero in five years.

"It repeals all prior sales and use taxes, except those that are in the Constitution, and those that are more excise taxes," Emery said. "It taxes at the retail level only for new products and services - so that you pay sales tax only once on any item."

Under current state law, sales taxes aren't charged on services like doctor visits, attorneys and labor on car repairs.

Emery's proposal "broadens the sales tax base to some services (but) not nearly all of them," he told the committee.

Missouri lawmakers removed the sales tax charges on food in the late 1990s - Emery's proposed amendment would restore some of those.

"Part of the whole process of moving from an income tax to a consumption tax - that makes it work - is broadening the tax base," he said. "What you're effectively doing with that shift in taxation is that you're removing all the hidden taxes on food that are there now, as well as sending workers home with a bigger paycheck - and then you are collecting that tax in a more transparent way, at whatever counter you make your retail purchases."

But Missouri's retailers aren't convinced they won't be hurt more than helped, Retailers Assn. President David Overfelt testified.

"Our economists feel that broadening the base and different forms of taxation is a better system than to rely on one or two ways to fund the government," he said.

The idea's been proposed before, by Emery and others.

"I think eventually, if we are truly serious about reforming tax policy so that it promotes the growth of the economy, this is where we'll end up," Emery said.

Earl Williamson, who identified himself as a "citizen" but didn't say where he lives, told the committee the proposal is "a good and welcome thing ... a real improvement over the current system."

He predicted tax collections would be better, and "the state could reduce the size of government by downsizing their IRS unit. However, to move these people into an active search for waste, fraud, duplication and abuse within the state would save the taxpayer multiple millions - possibly, billions."

Sen. John Lamping, R-Ladue, told Emery: "I completely support what you're trying to do."

But, Lamping said, the current income tax system has so many "roadblocks" built in - including exemptions and tax credits - that "we're not going to overcome them."

Ron Calzone of Vienna, a director of the group Missouri First, told Lamping: "The fact that (the current tax system) is such a complex problem to solve, speaks to the need to solve it.

"When the income tax system is so entangled, it offers lots of opportunities for mischief that, too often, undermines our liberty."

Chuck Pierce, representing the Missouri Society of CPAs, said they're concerned about "taking a laundry list of sales tax exemptions and putting them in the Constitution. Over time, that lessens the flexibility to come back (and) tweak an exemption" because of court rulings or business experiences.

Jay Hardenbrook of the Missouri Budget Project group said his group appreciates lawmakers "looking at the entire tax code and trying to completely reform it," but they don't like increasing the reliance on the sales tax, "which is, in its very nature, regressive."

"It definitely pushes more of the burden toward the middle class, and away from people who can best afford to pay taxes," Hardenbrook said.

Otto Fajen of the Missouri National Education Assn. told the committee the proposed change creates too many problems, and removes lawmakers' flexibility to handle state budgets.

"If we find out that we've done the math wrong, there are big numbers involved here - lots of zeroes," he said. "Our first desire is for you be in a position where you can invest in elementary, secondary and higher education."

And Missouri's Realtors question "the total shift from the income tax to sales tax," lobbyist Sam Licklider said, suggesting the change would produce less income for government than predicted.

"We've got to have sufficient money to fund the state at some level," he said.