The “Fair Tax” is back on the table and, again, I believe it is a burden on the lower and middle economic classes.
HJR 8, the "Missouri Jobs and Prosperity Act," is designed to phase out the state’s income tax and replace it with a sales tax of no more than 7 percent. At first blush, this does not sound bad. Anything that will increase my spendable income is a good thing, right? Well …
Let me start with information from the Missouri Budget Project, a nonpartisan, nonprofit, public policy analysis group. It is the group's assessment that the actual effective state sales tax rate would have to be as much as 12.25 percent, plus the local rates of about 2.75 percent, to make up for the revenue lost by eliminating income tax. That looks like Columbia would need a 15 percent sales tax to me.
Though the bill states that taxes taken in before and after passage will remain the same, the Joplin Independent reported that to be tax-revenue neutral, the state sales tax would have to be 12 percent, 5 percentage points higher than proposed. The Missouri Budget Project estimates that the current proposed rate will also cause an additional $3 billion state budget shortfall, requiring even deeper cuts to the state budget than we will see in 2012.
The proposed amendment would require the sales tax on almost everything we purchase. The key here is “almost everything.” There are three main exceptions:
- Gas and diesel fuels subject to the excise tax.
- Premiums for personal insurance policies
- Property purchased and taxes paid prior to enactment.
Here is the real problem. The new tax rate does not distinguish economic classes at the time of the sale. So add an additional 10 percent to the cost of prescriptions, the weekly grocery bill, the new home, the recreational vehicle, the lawn seed, and the list goes on.
More important is that most items that are currently tax-exempt will become taxable, including many of the foods that are either not taxed or have a limited tax. For example, here in Columbia the current food sales and food use tax for the state are set at 1.225 percent, but they would increase to 7 percent if this resolution passes. Also, your electric and water bill, for which you currently pay no sales tax, would see an additional 7 percent added.
The new sales tax would include prescription medications and doctor visits, including emergency room visits, making this tax especially hard on the elderly, those on fixed incomes and the growing number of uninsured individuals and families in Missouri.
Because of this lack of economic distinction, the hit will be to the lower economic echelon of our population, for it digs deeper into their income. For example, a family of four, regardless of economic class, will spend about the same amount for groceries each week. However, that additional $6 to $10 per $100 may prevent the low-income shopper from buying milk or making a healthier food choice.
Finally, “The Fair Tax” and the “Missouri Jobs and Prosperity Act” are evasive words hiding the true purpose of the law: to place the burden of the state revenues on the middle and lower income citizens of this state.
To borrow from Jay Leno, it is designed so the poor have to do more with less and the rich have to do less with more.
I urge the state representatives from Columbia and state Sen. Kurt Schaeffer to vote no on this resolution. I urge you to write your representatives and Mr. Schaeffer clearly stating your opposition to HJR 8.
David Rosman is an award-winning editor, writer, professional speaker and college instructor in communications, ethics, business and politics. You can read more of David’s commentaries at InkandVoice.com and New York Journal of Books.com.