Since the late 1980s, income inequality has grown in most parts of the country, according to a report by the Center on Budget and Policy Priorities and the Economic Policy.
The richest Missouri families have had the greatest income gains in that time period. The gap between Missouri’s richest and poorest families is the 22nd-largest in the nation, and the gap between the richest families and families in the middle is 14th-largest.
In light of these statistics, consumption tax legislation — known as the “fair tax" — says it would reconcile these disparities by replacing income taxes with a system that taxes spending rather than income. This would in essence establish a wide-scoped sales tax.
The consumption tax compensates for the increase in sales tax by giving every taxpayer a rebate. Those who are earning below the poverty level — below $20,000 — will not have to pay at the same level as those above.
But the Institute of Taxation and Economic Policy, a Washington-based policy research organization that has an office in Columbia, is strongly against the consumption tax. It says the new sales tax rate would have to increase to about 12.5 percent — up from 5.11 percent — for the bill to be truly revenue-neutral.
ITEP also says the burden of the increased sales tax will fall on lower income and middle-class families, while Missouri's wealthiest 1 percent would see the highest tax cuts.
In a report by FactCheck.org, a project of the Annenberg Public Policy Center of the University of Pennsylvania, “consumers would pay taxes on a great many things that may not intuitively seem like consumption,” such as rent, medical bills, utilities, gasoline and legal fees.
While federal legislation is still in committee, Missouri is on the forefront of this tax issue and has garnered interest from around the country. FairTax.org is even hosting the Midwest Fair Tax Rally from 8 a.m. to 4 p.m. on Saturday at the Boone County Fairgrounds.
State Rep. Chris Kelly, D-Columbia, an active advocate for the consumption tax, believes that compared to the income tax, the sales tax is more difficult to cheat and, logistically speaking, less expensive to collect than income taxes.
Why do you support or oppose the consumption tax legislation?