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Senate hearing explores eliminating income tax

Wednesday, January 13, 2010 | 12:01 a.m. CST; updated 8:52 a.m. CST, Wednesday, January 13, 2010

JEFFERSON CITY — Abolishing the income tax and allowing the state to go into debt were two budget fixes proposed to a Senate panel Tuesday.

Five witnesses testified to the benefits and problems of eliminating Missouri income tax, currently the state's largest source of revenue. Lost revenue would be made up by increasing the state's sales tax rates — currently at 4.2 percent — to 5.1 to 7.6 percent.

Proponents of the idea told a Senate "seminar" organized by the chamber's Republican leadership that Missouri is losing industry to states that have lower income tax rates, and that a reliance on sales as opposed to income taxes would provide the state a more stable funding base.

"Missouri is falling behind its competitor states," said Joseph Haslag, the executive vice president of the Show-Me Institute, a St. Louis-based conservative think-tank that promotes free markets, according to its Web site.

Haslag's organization proposes raising the sales tax rate in Missouri to 5.1 percent. Initially, this increase might not be enough to offset lost money from income taxes, a hole that could be filled temporally if the state was willing to take on debt, Haslag said.

Arthur Laffer, an economist who served in the Reagan administration, said the nine states that do not have an income tax have seen significant economic growth over the last 10 years compared to the states with the five highest income tax rates.

Laffer said states with revenue sources based on sales tax also see less of a fluctuation in money collected during economic declines.

"It's basic economics here," Laffer said, referring to his state-by-state comparisons.

Disagreement came from Missouri Budget Project Director Amy Blouin, whose organization speaks about budget issues involving lower income Missourians.

Blouin said a comparison of all states that currently have an income tax — as opposed to the top five that Laffer used — shows no discernible difference in growth compared to those that do not have an income tax.

The proposed bill that would eliminate the state's income tax, House Joint Resolution 56, would also place a sales tax on items that other states without an income tax do not tax, Blouin said.

"No other state taxes services like this would," Blouin said.

In order to equal revenue lost from income tax payments, Blouin said the new state sales tax rate would have to be as high as 7.6 percent.

Former state budget director Jim Moody, now a lobbyist for various business and health interests, agreed that raising the sales tax rate to 5.1 percent would not generate enough money to offset losses from eliminating income taxes.

Health care services would have sales taxes attached to them under the proposed bill.

Using numbers Moody said he found on the Show-Me Institutes's Web site, he estimated that raising the rate to 5.1 percent would leave the state $1.3 billion short.

"Stop messing around with the tax system without adequate research and adequate knowledge," Moody said.

Senate President Pro Tem Charlie Shields, R-St. Joseph, said that the current budget situation requires lawmakers to think about budget options not normally considered.

"No sane person would design (the current) tax structure," Shields said in closing remarks to the Senate seminar session.


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Comments

Layton Light January 13, 2010 | 8:35 a.m.

Great, more "Voodoo Economics" from Arthur Laffer, with whose help Reagan turned a creditor nation into a debtor nation. Reagan's budget director, David Stockman referred to the Laffer Curve and "supply side" economics used to justify tax cuts as a Trojan Horse, the sole purpose being the reduction of the top tax rate from 73% to 24%. This smells like another Trojan Horse to me.

Anyone with any education at all in Economics knows that a sales tax is a regressive tax. We already have what is essentially "flat tax" in Missouri anyway, so if "Supply Side" economics worked, business and the local economy should be flourishing.

By the way, if you want local context, Stockman is the idiot who bankrupted Collins & Aikman. Of course, Stockman blamed it on the economy, even though it went down the tubes well before the collapse.

(Report Comment)
Ayn Rand January 13, 2010 | 12:39 p.m.

If you believe that Missouri government doesn't have enough money, you're always free to send more than just what you owe in taxes.

(Report Comment)
Layton Light January 13, 2010 | 7:39 p.m.

Well Ms. Rand, welcome back from the dead. How are things on the other side? From a definition of "Objectivism: "...the only social system consistent with this morality is full respect for individual rights, embodied in pure laissez faire capitalism." If that's the point of your post, then you're welcome to the freedom that is most third world countries that practice such a system of economics and government. I'm thinking, Mexico, Somalia, etc. Few taxes there, but good luck with living long enough to enjoy your "freedom."

(Report Comment)
Ayn Rand January 13, 2010 | 9:09 p.m.

No, Layton, the point of my post is what I wrote: If you believe that Missouri government doesn't have enough money, you're always free to send more than just what you owe in taxes.

I can make it even simpler if it helps: Put your money where your mouth is.

(Report Comment)
Layton Light January 14, 2010 | 12:19 p.m.

Ayn, I think I already do that. 30% isn't good enough for you? My point is, Missouri is one of the poorest states in the nation in terms of pay to it's employees and services provided. Actually I think only Arkansas is lower in pay for most positions within state government. Meanwhile, it is in the upper third in average income of it's citizens. The discrepancy is due to the lack of progressiveness in the tax structure.

The progressive tax structure that existed prior to Reagan and Kemp-Roth saw this country through it's most prosperous time, and in the process the middle class flourished and became the engine for our economy. We built the national highway system, bridges, schools, and the infrastructure necessary to keep our citizens safe.

The book, "What's Wrong With Kansas" could also be called "What's Wrong With Missouri." It never ceases to amaze me how "Red" states continue to support right wing politicians who enact laws and policies that go against their economic self interest. The politicians recognize that there is a problem in Missouri in that there isn't enough money to properly provide the services required, but then they come up with idiotic ideas such as the "Fair Tax" that is clearly regressive and hurts middle and low income people more than the rich and try and sell it, like snake oil, to the ignorant citizens of this state.

The real irony here is that the driving interest of these conservative ideologues is the reduction of the tax burden of the rich. Their thinking, or their "rationale" is that, by doing so they will spur investment and business, and all will be prosperous. All the while their policies punish the very people who are the driving force in our economy.

Somehow it's fitting that Laffer, and his failed, idiotic, economic theories have found a place in a right wing "think tank" in Missouri. It's equally fitting that he's found an ear in that group of conservative numb skulls in Jefferson City.

PS: "All Columbia Missourian publications are committed to a policy of transparency and openness. In that spirit, your first and last name will be attached to each post you make." I use my real name. Why do you hide behind a fictitious one? Come to think of it, there's probably copyright issues in your using that name

(Report Comment)
Ayn Rand January 14, 2010 | 1:24 p.m.

Again, Layton, whether 30% is enough isn't up to me. That's up to you. If you want the government to have more money, give more of yours. There's no law preventing you from doing so. I'm certainly not going to give more than what I owe in taxes, meaning it's up to you to dig deeper into your pockets.

(Report Comment)
John Schultz January 14, 2010 | 2:21 p.m.

Layton, how do even know that is your name? I can guess that Ayn is not who she is (and you can't copyright a name to the best of my non-legal memory), but why should it matter? I can assign a value or reputation to what "Ayn" says, irrespective of their real name.

(Report Comment)
Layton Light January 14, 2010 | 6:12 p.m.

Again, Ayn, my giving more money will not solve the problem. The idea of taxation is that the people who form a representative government have them tax the citizens to provide for needed services and facilities. The problems presented by Missouri’s budget problems will not go away by anyone volunteering to give more money to the government. So, in the end, it’s just a stupid suggestion, and probably not even worth the effort of the intelligent response I gave it.

John, I was merely pointing out the supposed policy of the Missourian, and the fact that using a name like Ayn Rand is obviously not in compliance with that policy. You don’t know that Layton Light is my real name or not, but the Missourian should surely be able to tell that Ayn Rand is not. Why does the Missourian have a policy if they are not going to enforce it?

By the way, the Ayn Rand Institute web site, states that the name “Ayn Rand” is a registered trademark of the Ayn Rand Institute.

(Report Comment)
Mike Martin January 14, 2010 | 9:39 p.m.

@Layton:

I'm not sure how you've made the conclusion that higher pay for government employees is necessarily good for the community. In case you haven't noticed, government employees aren't building national highways, bridges, schools, and the infrastructure necessary to keep our citizens safe.

We are way behind much of the Western world in infrastructure, with lack of high-speed rail being the most egregious example. We had a Superfund supposedly designed to rid the country of toxic waste dumps. Instead, it made lawyers rich. Three decades ago, Congress promised to create another Superfund, this time $50 billion to construct better highways (oh for the days when 50 bil was actually real money). That plan never materialized.

What is implicit in your ideas here is that some enlightened, presumably left leaning politicians will use tax dollars wisely.

They won't. Instead, they will continue to spread tax dollars among their big-money supporters in the form of bailouts, targeted special interest tax breaks, and all manner of corporate welfare.

If you want specific local examples, I can provide plenty. Just recently, our own city hall -- under the direction of our designated King, William Watkins -- tried to use $250,000 of taxpayer money to fund an eminent domain move that could have destroyed several local businesses.

That move was designed to please an elite few that included our local millionaire newspaper publisher, Hank Waters.

Mr. Watkins is a highly-paid government employee -- one of the highest-paid in the area, by far. He also works for a generally left-leaning city council that, to this day, has never so much as reprimanded him for his unauthorized actions.

High pay and a leftist philosophy don't equate to enlightened government. Good people do, from any partisan stripe.

And until we energize passionate, committed people to take the helm of government services, we will continue sinking in the cesspool of corruption that brought left-leaning Ben Nelson selling out the country for a health care vote; New Orleans sinking while left-leaning mayor Ray Nagin fiddled like Nero; and several of our own left-leaning city and county leaders, run amok trying to satisfy the greedy appetites of a select and pompous few.

(Report Comment)
Ayn Rand January 14, 2010 | 10:06 p.m.

Layton, only a fool would advocate higher taxes, considering how government at every level wastes money. If "the problems presented by Missouri’s budget problems will not go away by anyone volunteering to give more money to the government," then how will they go away by urging the government to take more money?

As for your whining about my name, you sound as silly as Charles Dudley, who wound up getting banned here and on the Trib site for annoying so many people with petty complaints.

(Report Comment)
Layton Light January 15, 2010 | 12:18 p.m.

Ayn and Columbia Heartbeat, (There's another of those fake names!) I wouldn't even try to convince neo-cons like the both of you of the need to pay government employees a decent wage, or tax at a level that funds what government should do. You are both obviously of the right-wing school of thought that government should be run by people who hate government. Gee, that worked so well for the last 8 years. As for my “whining” about your use of a fictitious name; if The Missourian wants to ban me for pointing out flaws in their “policy,” they are welcome to do so. Why don’t you suggest it to them Ayn? Report this post. Whatever Charles Dudley’s faults were, at least he had the guts to use his own name. Done.

(Report Comment)
Ayn Rand January 15, 2010 | 1:42 p.m.

Layton, we'll get right on those pay raises after government employees -- which I'm starting to think includes you -- give up their defined benefit pensions, which are a time bomb that's going to obliterate the state budget. Even fellow state employees are incensed (www.columbiamissourian.com/stories/2009/...) by some of the goodies unavailable to most private-sector employees.

(Report Comment)

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