JEFFERSON CITY — State representative Chris Kelly, D-Columbia, spoke early and clearly in his support of *House Joint Resolution 36 on Tuesday afternoon. Kelly joined a mostly Republican majority in approving the sales-tax resolution for perfection and printing. The resolution received no amendments and should face a final reading and vote Thursday.
“I applaud and support the work of the gentleman,” Kelly said of the resolution’s handler, Rep. Ed Emery, R-Lamar. “I choose the sales tax over the income tax."
HJR36 would allow Missourians to amend the state’s constitution at the polls in 2010 by abolishing the state’s income, corporate and estate taxes. HJR36 gives Missouri voters the option to increase the state’s sales tax from 4.225 percent to 5.11 percent and to broadly expand the state’s tax base by applying the tax to services as well as consumable goods.
Kelly was one of few Democrats to vote for HJR36, and he was the only one to speak in support of it. He said he sees reevaluation of the tax structure as a matter of practicality.
“The sales tax is far more universal and harder to escape than current income taxes,” Kelly said. Missouri's “income tax has become a cesspool for special-interest lawmaking.”
Kelly thinks a “simple and transparent” tax structure such as Emery’s could clean up Missouri’s tax practices.
“The sales tax has so many practical advantages,” Kelly said. “And it is far more popular with the people, regardless of income or education. ”
Kelly added: “Popularity is a legitimate measure of how we ought to tax.”
Kelly’s fellow party members, however, were less supportive of HJR36. Emery spent roughly two hours fielding questions from skeptical Democrats.
“I am concerned with the regressivity this would cause,” said Rep. Jeanette Oxford, D-St. Louis. “It’s moving the tax burden down on those Missourians earning less.”
Oxford, who had words with Emery and Kelly over the issue during a committee hearing on the bill, said lower-income Missourians would be most affected by the tax because they spend more of their income on things that would be taxed, compared with wealthier Missourians.
“Families with low incomes spend three-fourths of their incomes on items that would be taxed,” Oxford said. “But the wealthiest in this state would be paying only a sixth of their income” toward state taxes.
Kelly said he agrees that the sales-tax could have a regressive effect but feels the broadening of the tax to services and sales could alleviate such regressivity.
“When you place a tax on services, you tend to tax the rich more than the poor,” Kelly said. “The rich spend more on services.”
Emery said the resolution’s tax prebate — which was included to help ensure that Missourians living at, near or below the poverty line wouldn’t be drastically impacted by a new tax system— should help offset any increased costs to Missourians. Under the proposed prebate, households could expect a tax refund every month to offset the cost of living.
“Anyone can get the prebate,” Emery said. “The only people who wouldn’t get a prebate are those people who are here illegally.”
Democrats including Assistant Minority Leader Rep. JC Kuessner of Eminence, questioned the efficacy HJR36 would have if enacted.
“I’m skeptical that the services (that would be taxed) are there to make up for $7 billion in lost revenue … with just a .8 percent increase in sales taxes,” said Rep. Trent Skaggs, D-North Kansas City.
“If (Emery) can convince me that a .8 increase in the sales and service taxes will generate the $7 billion necessary for state revenues … I will vote for this bill.”
Other Democrats also questioned whether or not Missourians would choose to pay a higher sales and service tax rather than go out of state for those goods or services.
Kelly said close attention needs to be paid to such concerns, but on the whole the resolution was the best solution for Missouri’s economy.
“By taxing consumption, and not income, you will see a lot less volatile revenue stream,” Kelly said earlier. “We’ll see less revenue problems with this.”
Both Emery and Kelly said they were pleased with the progress the resolution made Tuesday afternoon. Emery expects the final reading and vote to happen Thursday, and is confident it will pass in the House.
“The best way for people to attack this concept of a fair tax is with the threat of the unknown,” Emery said. “The fact is, this is the best thing Missouri can do for long-term economic viability.”
Added Emery: “I’ve never seen (the potential for) such a powerful economic tool in my time in the legislature.”