Missouri Senate considers ending individual and corporate income taxes

September 26, 2011 Local News 1 Comment

Missouri Senate considers ending individual and corporate income taxes

The Missouri State Senate is considering the elimination of individual and corporate income taxes, but such a move comes with a few caveats, and as always, the devil is in the details.
The lost revenue would be replaced with a higher sales tax on everything you buy in Missouri.

Under a plan, sponsored by Sen. Chuck Purgason, personal and corporate income tax would be eliminated. Purgason has deemed the plan the Fair Tax Plan.
The FairTax plan currently calls for a new state tax rate of 5.1 percent. But proponents concede that they relied on incorrect census information to arrive at that figure, and they say they plan to change it after more research, probably to something close to 6.2 percent.

Missouri currently imposes a sales tax of 4.225 percent on retail sales. Of that, a 3 percent levy goes to the general fund and the rest goes to education, conservation and parks. Local sales taxes come on top of the state levy and average 3.5 to 4 percent, though they would probably be lowered to reflect the broader base if the FairTax passed.
FairTax bills have been filed for at least six years but drew little attention until last year, when the House, on a 90-65 vote, passed a resolution putting the plan on the ballot. That measure died in the Senate.
Nationally, the idea of replacing the federal income tax with consumption taxes has been percolating for a decade.

Opponents say the FairTax proposal would be bad for Missouri. They say losers would include:

• Working-class families, who spend a higher percentage of their income on goods and services.

• Businesses near the state’s borders, which would lose sales to states with lower tax rates.

• Parents of private and parochial K-12 students, who would owe a tax on top of tuition payments.

• Groups such as historic preservationists that rely on income tax credits. If the income tax disappears, there would no longer be a market for selling tax credits.

To understand the scope of the change, consider that Missouri collects about $5 billion from the individual income tax. Corporate income taxes and other business taxes targeted for repeal produce an additional $450 million.

In addition to replacing that revenue, the new sales tax would have to generate at least $2 billion dollars to pay for the subsidy every family would receive to defray sales taxes on necessities.

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas,Washington and Wyoming, currently have no personal or corporate income taxes.