Wednesday, April 22, 2009
By: Chad Livengood
Critics claim measure would burden poorest
Jefferson City -- The Missouri House gave final approval Thursday to a proposed constitutional amendment to abolish the state income tax and replace it with a "fair tax" based on consumption.
The proposal would raise the state sales tax from 4.225 percent to 5.11 percent and eliminate the 6 percent personal income tax and 6.25 percent corporate income tax on business earnings. Estate taxes would remain on the books.
The tax structure is known as a fair tax because it taxes people based on their spending and gets rid of all exemptions, deductions and credits carved in the tax code -- often to the benefit of special interests.
But critics, including some Republicans, said the legislation is flawed because it would levy taxes on things that aren't taxed now, such as home purchases, food and prescription drugs.
"The way it's written, it's not a 'fair tax,'" said Rep. Dennis Wood, R-Kimberling City, who voted "present."
The resolution passed 90-65, with seven members absent and Wood casting the only "present" vote. Mostly Republicans supported the measure, which requires Senate approval before it can be placed on the 2010 ballot.
"I'm not just a 'yes sir' man. I think for myself. I think this is wrong," Wood said of his choice to effectively sit out the vote.
Wood said he supports replacing income taxes with a flat sales tax, but said the current proposal would place an unfair burden on senior citizens in his Stone and Taney county district.
Rep. Ed Emery, R-Lamar, is sponsoring the resolution and argued that it would not impact state tax revenue while spurring job growth through the elimination of corporate income taxes.
"It will catch the cheaters and the illegals because they'll be paying taxes, where they aren't now," Emery argued Tuesday on the House floor during initial debate.
Democrats criticized the fair tax plan as regressive, saying it would be a burden on the working poor, and people who often pay little to no income tax to begin with. Democrats also took exception with the fact the new sales tax would not apply to corporations when they're purchasing goods and services from other businesses.
"If I'm an individual, I don't get the same tax relief that a corporation does. That doesn't seem fair," House Democratic Leader Paul LeVota said Thursday during final debate.
To offset taxing basic necessities, Emery's proposal would create the distribution of a monthly tax rebate check to cover the cost of any taxes incurred up to the federal poverty level, which is $26,000 for a family of four.
"I think this is the most family-friendly way to gather revenues that I've ever seen," Emery said, noting people would have more money in their paycheck without a state income tax deduction.
Democrats from St. Louis and Kansas City argued on the House floor that people in their districts living along state borders would cross into Illinois and Kansas to purchase goods because those states would have lower sales taxes.
Emery predicted just the opposite would happen and that neighboring states would adopt a similar tax code to compete if Missouri changed its system.
"They're the ones that are going to have to scramble to figure out how they're going to compete with a state with no income tax," Emery said on the House floor.
If approved by the Senate and voters, the change in tax structure would begin on Jan. 1, 2012.
Rep. Eric Burlison, R-Springfield, spoke Thursday in favor of the bill on the House floor.
He cited a recent report by the American Legislative Exchange Council that noted a consumption-based sales tax system fuels economic growth.
"From the evidence that we're seeing, those states that have a sales tax- only system do attract people" and businesses, Burlison said.
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Not exactly the "breaking news" I thought it was. Gonna have to flog my sources!
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