JEFFERSON CITY — Missouri Gov. Jay Nixon said Thursday that proposals to replace the state's income tax with an expanded sales tax were the wrong way to go while expressing concerns that the proposal could make it harder to compete with bordering states.
An increase to the sales tax is a particular concern for Missouri because it borders so many other states, Nixon told members of The Associated Press and the Missouri Press Association at their annual Capitol media event. Nixon, a Democrat, said increasing the sales tax and levying it on purchases that previously had not been subject to the tax is not "a smart economic thing or a smart thing to do."
"That's a significant tax increase on things that — for a lot of good reasons — have not been taxed in the past," Nixon said. "And to make that sort of dramatic shift at this juncture would be problematic."
Proposals to replace income taxes with a sales tax have been considered in the legislature in recent years. Backers of the concept also have submitted several versions of a constitutional amendment that could appear before voters in the November 2012 election. The proposals include the same concept, but some details differ.
Supporters of the tax change say it would help boost economic development. They point out that states without an income tax have out-performed those that have one.
House Speaker Pro Tem Shane Schoeller said the proposed tax changes could help attract employers to Missouri.
"I can guarantee you that for employers, if they don't have to worry about income tax, that's an incentive that they appreciate, that they want to have when they're looking at their business model and moving to a state," Schoeller, R-Willard, said.
The House Tax Reform Committee earlier this week held a hearing about a sales tax measure sponsored by a Republican lawmaker.
For the versions proposed for the ballot, supporters must collect signatures from two-thirds of the state's congressional districts equaling 8 percent of the votes cast in the 2008 gubernatorial election. That amounts to between about 146,000 and 160,000 signatures depending upon which congressional districts are targeted. Before signatures are gathered, state officials develop a ballot summary and cost estimate.
State Auditor Tom Schweich told journalists during the media day at the Capitol that he does not believe an accurate cost estimate can be calculated for the proposed ballot measures because it would require too many assumptions. He said it is unclear how consumers would react to the tax change and that the ballot proposals would require lawmakers to make decisions that currently cannot be predicted.
Schweich's proposed estimate states that the cost to state and local governments could not be determined because of those uncertainties.
"I don't think anyone can responsibly say anything else," Schweich said.
Missouri currently has a 4.225 percent state sales tax, lower than several neighboring states. Of that, 3 percent is for general state revenue and 1.225 percent is for dedicated purposes to cover conservation, education and state parks. Local governments also can levy a sales tax.
Many of the tax proposals would cap the sales tax at 7 percent. Records obtained Thursday by the AP through an open documents request show that the state Office of Administration estimated a 7 percent sales tax rate could lead to a revenue shortfall of around $1 billion. The office estimated the sales tax would need to be more than 8.1 percent for general revenue and education.
Supporters of the tax ballot measure, meanwhile, suggested the financial analysis says the cost to state and local government was unknown, while many state entities estimated it would have no cost. Backers also said that their proposals would have a positive economic affect for small businesses and that consumers could benefit from that.