Ed Robb, an economics expert, is the only candidate for state representative in Boone County this election who is making an issue of Missouri’s complicated tax structure.
With simplification as his ultimate goal, Robb, the Republican candidate for state representative in the 24th District, suggests several changes to the state tax code.
“There is no reason that the state individual income tax return should be larger than a postcard,” Robb says on his Web site.
Robb would like to see the Missouri individual income tax go to a flat-rate tax. Under a flat-rate personal income tax, everyone in the state pays the same percentage of their income to the state. For example, in Illinois, one of the six states to have a flat-rate personal income tax, individuals pay 3 percent of their taxable income to the state.
How taxes are, how taxes could be
Missouri relies on a slightly progressive income tax in which the percentage of income paid differs depending on how much money an individual earns each year. The percentage ranges from 1.5 percent to 6 percent of personal income for state taxes, depending on a person’s tax bracket.
If Missouri went to a flat-rate income tax, Robb said that to keep revenue the same the rate would have to be fixed at a minimum of 4 percent and possibly as high as 6 percent. This rate would depend on what the legislature wants to do with deductions, credits and exemptions, he said.
“If you’re going to rework it, everything’s on the table,” Robb said.
To get the tax form trimmed to “no larger than a postcard,” Robb said there would be “one deduction for everyone.” How the legislature picks that number is how they arrive at the rate.
“If you raise the amount of the deduction, then you have to raise the rate,” Robb said. “So it’s a trade-off.”
Robb said he would seek support from state Sen. Michael Gibbons, who has introduced a flat-rate income tax the past two years and made other lawmakers to take notice.
“You have to be dedicated to tax reform to get this through … since there’s winners and losers, it’s open to considerable debate,” Robb said.
Robb said that although with this proposal some taxpayers might pay more, he asks the question, “Are taxpayers willing to pay a little more or less so they can figure it out in 15 minutes or less, maximum?”
“It would be a nice thing to do and I think most people would appreciate it,” Robb said.
Saku Aura, an MU economics professor, said that flat-rate taxes are generally easier to administer, but less distributive than graduated taxes.
Citing a 2003 study done by the Institute on Taxation and Economic Policy on the effects of a flat tax in Missouri, Robb’s opponent in the 24th District, Democrat Travis Ballenger, said the plan is the “wrong idea.”
“I do not support a flat rate because it would further shift the burden on working families,” Ballenger said.
Ballenger said that the tax code is outdated and “needs to be revisited” but that he does not support an “across-the-board tax increase.”
“Individuals and small business owners already carry the tax burden,” Ballenger said. “It’s time to close the corporate tax loopholes.”
Ballenger said the state has a revenue problem and his proposed actions — such as slightly increasing taxes on casino boat owners and eliminating the casino loss limits — would get “more revenue into the big pot.”
Besides going to a flat-rate income tax, Robb would like to see the legislature close loopholes in corporate income taxes. He is against eliminating the single-factor allocution tax option for corporations, which allows corporations to be taxed on their sales alone. He said it’s important to keep the option so that large corporations that offer good employment, will stay in the state.
He also has plans for reviewing the franchise tax on corporations and overhauling the state sales tax.