JEFFERSON CITY — Missouri’s income tax and the level of state spending came under attack Tuesday during a state Senate committee hearing.
A constitutional amendment heard by the Ways and Means Committee would eliminate the state income tax and cap state general spending, pushing state government to be more selective with the money it generates.
Several people offered testimony to the committee on the amendment.
“I think the goal here is to ensure taxpayer dollars are utilized properly, and that government spending doesn’t increase too dramatically in the effect of economic improvement,” said Jeremy Cady, director of the Missouri branch of Americans for Prosperity, a grassroots organization that advocates for lower taxes and less government regulation.
State Sen. Bill Eigel, R- St. Charles, said the amendment reflects a desire among Missouri voters for less government regulation. Eigel is the sponsor of the bill that proposes the amendment.
"Overwhelmingly present in the voters that I spoke with was a dissatisfaction with the growth and overreach of the government at all levels: federal, state and local,” Eigel said.
The amendment would cap spending at the previous year's rate, except to accommodate the rate of inflation and population growth.
Opponents argue that a cap on spending will limit the ability of legislators to advocate for their constituents' budget priorities.
"That's why senators and representatives are elected and sent here, to represent the priorities of their constituencies that change over time,” said Mike Sutherland, policy director of the Missouri Budget Project, a nonprofit organization that researches state politics issues. "In 20 years, those priorities may be different than they are today."
The amendment would also eliminate Missouri’s largest source of revenue — income taxes.
Missouri collected 61.7 percent of its gross collection for general revenue in individual income taxes during fiscal year 2016, according to the 2016 general revenue report by the Missouri Office of Administration.
If passed, the proposal could begin as early as 2020, and the income tax would be reduced each year. Income-tax rate brackets would be eliminated from lowest to highest.
The state would completely phase out the state income tax by tax year 2049, according to the amendment's fiscal note.
"At that point, the general income coming in the state would be from sales tax revenue,” Eigel said.
In fiscal year 2016, sales tax revenue collected only $2.10 billion, compared to $7.16 billion from income tax.
“Over time, we have somewhat destroyed our revenue base,” said Jim Moody, lobbyist for the Civic Council of Greater Kansas City.
Moody said it would be unwise to eliminate income tax because Missouri voters approved in November an amendment that bars state and local sales taxes from being applied to any transaction or service not already taxed as of Jan. 1, 2015. The amendment prevents sales taxes from being expanded to services such as auto repair and accounting.
Eigel said he believes getting rid of the income tax will increase growth, and the phasing out process will benefit lower-income Missouri residents.
“As those rates are eliminated, we will start with the lowest rate first and move our way up until the only rate left is the highest rate. That was done on purpose because the folks that will benefit first from these changes are those with the lowest amount of pay,” Eigel said.
The committee did not vote on the amendment. Should it pass the General Assembly, Missouri voters would also have to approve it in the next general election or through a special election.
Supervising editor is Ellen Cagle.