Missouri legislators discuss proposed consumption tax

Monday, February 6, 2012 | 7:48 p.m. CST; updated 9:01 p.m. CST, Monday, February 6, 2012

COLUMBIA — It's been called many names. "Fair tax," "consumption tax" and "everything tax." Once again, it's being discussed as an option for Missouri and a proposal is being bankrolled by Rex Sinquefield.

On Monday morning, state Sen. Kurt Schaefer, R-Columbia, and Rep. Chris Kelly, D-Columbia, were part of a panel at Hy-Vee, 405 E. Nifong Blvd., hosted by the Show-Me Institute, that discussed replacing the income tax with an expansive sales tax, or consumption tax. Both legislators support a consumption tax over a higher income tax to raise revenue, but they oppose the ongoing initiative petition effort funded by Sinquefield.

"The tax proposal that my friend (Sinquefield) is supporting is ... bad for the state of Missouri," Kelly said. He favors a higher sales tax combined with some income tax on upper-level incomes and a rebate for lower-level incomes.

The recent initiative petition sponsored by Sinquefield — president of the Show-Me Institute — would replace the income tax entirely with sales tax. Last week, Sinquefield made a $1.2 million donation to Let Voters Decide, a political action committee that advocates for a consumption tax. Sinquefield also donated $1.3 million last fall to the same group, according to The Associated Press. He attended Monday morning's discussion.

Kelly has supported the idea of a consumption tax in the past. In 2009, he filed a bill that would have ended the income tax at the beginning of this year. The bill failed.

"I have been a consistent supporter of going to a greater degree of dependence on sales tax rather than income tax," Kelly said, though the idea of a consumption tax has more support from Republicans than Democrats — Kelly's party.

"If we're going to move toward sales tax, we have to do so gradually, and we have to do so in a responsible way," he said.

Kelly's partner on the panel, Schaefer, also supports taxing goods rather than income. Schaefer is chairman of the Senate Appropriations Committee, and Kelly is on the House Budget Committee.

"I like the idea of taxing consumption rather than production," Schaefer said. But, he added, a consumption tax could be problematic at a time when substantial debt in general revenue could find the state strapped for cash due to spending on other programs such as Medicaid.

"I would be much more comfortable with it if I actually saw data that showed that through a transition period you would not have a decline in general revenue and that overall it would be sustainable," Schaefer said.

Both legislators said a consumption tax should be implemented with caution, saying that the current economic situation could be worsened if a consumption tax took effect soon.

Sinquefield is supporting the Missouri Taxpayer Relief Act, which combines two petitions relating to a consumption tax. They were filed in October and approved by Missouri Secretary of State Robin Carnahan for circulation.

The act would increase the state sales tax by 5.5 percent on food and by 7 percent on other items. Sales tax would not exceed 10 percent. The petitions — which would eliminate the income tax — will be on the November ballot if they gain enough signatures.

Moving from an income tax to a consumption tax is an idea that has been around for years. The idea is that taxes would take from spending, not earning. Basically, people would be taxed on how many doughnuts or cars they buy, not by how many they can afford. Currently, 17 states do not have an income tax.

Monday morning's forum was organized by the Show-Me Institute. It provides panels and literature on a variety of public policy issues, Elizabeth Lanier-Shipp, director of development, said. It also takes feedback from members on what issues to discuss. Monday’s panel came in response to Gov. Jay Nixon's State of the State speech, Lanier-Shipp said.

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