Missouri House advances proposal to replace income tax with higher sales tax

Wednesday, April 15, 2009 | 8:29 a.m. CDT; updated 12:18 p.m. CDT, Wednesday, April 15, 2009

JEFFERSON CITY — On the eve of the deadline for filing income tax returns, the Missouri House gave preliminary approval to a constitutional amendment replacing the state income tax with a higher sales tax.

The proposal would bump Missouri's sales tax on most items to 5.11 percent from the current 4.23 percent and apply it to some goods and services not currently subject to the tax. Individual and corporate income taxes would be abolished.

House members endorsed the proposed change to the Missouri Constitution by voice vote Tuesday night, just hours before the arrival of the April 15 tax filing deadline.

A second affirmative House vote would send the measure to the Senate. Passage by both chambers would put the question on a 2010 statewide ballot and, if approved by voters, it would take effect in the 2012 tax year.

Sponsoring Rep. Ed Emery, R-Lamar, called the proposed sales tax a "fair tax" that would get at "the thieves and the cheaters and the illegals" who, he said, don't pay income taxes. He also argued the proposal would be an economic development boon that would force neighboring states to scramble for ways to compete with Missouri.

"It would move the taxes where they need to be: Those who are spending the most money will pay the most taxes, not those who are working the hardest," Emery said.

Although long favored mainly by conservative legislators, the proposal is also backed this year by Rep. Chris Kelly, D-Columbia, who said the sales tax is cheaper and easier to collect than the income tax.

"The income tax has become a cesspool of special interest law," Kelly said.

But most House Democrats remain opposed, for a range of reasons.

Rep. Roman Lee LeBlanc, D-Kansas City, said raising the sales tax and applying it to more purchases would be especially hard on middle-class and elderly Missourians and would shift the tax burden away from the wealthy.

Others suggested that residents of the Kansas City and St. Louis areas would shop in Kansas and Illinois to avoid Missouri's higher sales levy.

And some expressed skepticism that higher sales taxes would offset the revenue lost by abolishing income taxes.

Emery said most of the new revenue would be generated by expanding what is subject to the state sales tax.

Under the proposal, state sales taxes would be levied on accounting, legal and other professional services, plus groceries and prescription drugs that are not currently taxed. Purchases made by businesses or solely for investment purposes would be exempt.

Rep. J.C. Kuessner, D-Eminence, said the idea of shifting Missouri's tax structure is intriguing but needs more study and review.

"It just won't work. It's something that might sell, it might sell out there, but in the end it's going to come at a cost to this state in many ways," Kuessner said.

Under the proposed constitutional amendment, lawmakers could adjust the sales tax rate once without seeking voter approval to ensure that state coffers don't gain or lose revenue by shifting away from income taxes. The measure also would issue tax rebates to offset the sales tax paid by low-income people.

Normally, the secretary of state's office would be responsible for drafting ballot language to summarize proposals, but the legislation endorsed by the House specifically states what would appear on the ballot.

The ballot language would state: "A 'yes' vote will amend the Constitution of the State of Missouri to eliminate individual and corporate income tax, and state sales and use tax to enact a single, revenue-neutral sales tax of five and eleven one-hundreths percent on new purchases of goods and services, and to exempt property purchased for business or investment from the sales tax, and to provide each qualified family with a sales tax rebate to ensure no state sales tax is paid on purchases up to the federal poverty level."

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Michael Hrach April 15, 2009 | 2:22 p.m.

I would want more information regarding "...each qualified family with a sales tax rebate..." before I support a higher sales tax. I am retired, I did not have to pay federal income tax because of income, but I did have to pay a state income tax of $27, far less than than the tax I would have to pay for groceries.

(Report Comment)
Robert Barr Jr. September 25, 2009 | 11:43 p.m.

I just signed a petition to stop the state from charging a 7 percent sales tax if you had a gain or a loss.If you sold the house for 150000 dollars,you would have to pay 7 percent in taxes.Is this true?

(Report Comment)
Kim Hanlon April 21, 2011 | 11:19 a.m.

States that have no state income tax get money from casinos like Las Vegas or oil like Alaska. Sounds like MO doesn't want to tax companies. HMM that's an original idea. Why do workers keep getting the shaft? I think we already pay enough tax on groceries. Illinois doesn't tax food. That certainly does help. I do buy groceries at times in Illinois. I live rural & have to drive anyway. It would not hurt to drive another 20 miles. I'm just sick of businesses not having to pay their fair share. We did not create this crisis take it out on those who did.

(Report Comment)

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