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Lawmakers discuss abolishing income tax, raising sales tax

Friday, January 29, 2010 | 12:01 a.m. CST; updated 10:07 a.m. CST, Friday, January 29, 2010

JEFFERSON CITY — Lawmakers discussed a proposal that would dramatically alter Missouri's tax structure Thursday.

Sen. Chuck Purgason, R-Caulfield, proposed an amendment that would do away with state income tax and instead raise sales tax to compensate for the lost revenue. The state would not take in any more funds than it has in previous years, Purgason said, but instead pull revenue from different sources.

Under the proposal, the state's current sales tax would expand to include services and items such as rent and prescription drugs.

Legislators estimate the current 4.2 percent sales tax could increase to anywhere from 5.1 percent to 11 percent. Rep. Chris Kelly, D-Columbia, said he supports the amendment "if  they can work out the problems."

Kelly said his concerns include a potential decrease in Missouri business, as citizens living in border cities, such as St. Louis, Kansas City and Cape Girardeau, could be driven across state lines to make purchases. Additionally, Internet shopping could become a cost-effective alternative for those looking to avoid a sales tax.

Purgason acknowledged these concerns but pointed out that Missouri's current sales tax is lower than that of all eight border states.

"No one likes change in government," Purgason said. "We get comfortable. But this is about the individuals being in control. They make the choices about what they buy. It levels the playing field."

Jim Moody, a former state budget director and current lobbyist, said he's heard it called both a "crib to crypt," and "womb to tomb" tax. Moody's lobbying clients include businesses and health care providers.

"Since a child is born there's going to be an 8 percent to 11 percent sales tax on the hospital bill," Moody said, "and when that child ages, a sales tax on the nursing home bill. And then, after death, the actual funeral service is also subject to this very large sales tax."

According to Moody, people with high wealth and passive income, such as capital gains, interest, and dividends will benefit most from this amendment. Moody added that health care, professional services, and domestic utilities would be affected most by this change, making a trip to the doctor's office or hiring a lawyer taxable purchases.

Kelly suggested keeping the sales tax increase fairly low, and raising the additional funds from another source, such as the upper tax bracket so as not to burden lower income households.

"We can't afford to do this wrong," Kelly said. "It could screw up finances for the state of Missouri and for the private sector."

 


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