Supporters of a plan to repeal Missouri’s income tax took two blows Thursday (Feb. 10), as Gov. Jay Nixon criticized the idea and the Republican state auditor said he could not predict its cost to the state.
The proposal calls for abolishing the personal income tax while raising Missouri’s 4.225 percent sales tax to make up for lost revenue. Supporters say taxing residents based on spending instead of earnings is fair; opponents argue the change would harm the poor.
How high Missouri would need to raise its sales tax is up for debate, and state Auditor Tom Schweich said the impact on state revenue is “unknown.” Former budget director Jim Moody, who opposes the change, has said the sales tax could reach 14 or 15 percent. Moody, who now lobbies for various business interests, told a legislative committee the measure would “bankrupt” the state.
At a session with reporters later in the week, Nixon voiced his own concerns.
“Especially in a state like Missouri that touches more states, when you’re trying to sell goods, raising the sales tax that high makes those goods non-competitive,” Nixon said.
The governor said the sales tax would extend to items such as prescriptions, insurance and private school tuition, which currently aren’t taxed.
There have been nine petitions filed with the Secretary of State’s office to get the income tax repeal on an upcoming ballot. Schweich provided cost estimates that varied from no fiscal impact to one that would create a $1 billion budget shortfall.
“[It is] my duty to inform the voters when initiatives are so broad that the fiscal impact cannot reasonably be predicted,” he said. “That is the case with each of these petitions.”
Reactions from Republican legislative leaders was mixed. Senate President Pro Tem Rob Mayer, R-Dexter, said he was not against the proposal, but said it would open the door to lobbyists to fight for tax exemptions for their industries.
“What services do you exempt out?” he asked. “When you start exempting some out, other interest groups say, ‘Hey, why shouldn’t we be exempted out?'”
Top House Republicans, including House Speaker Steve Tilley, R-Perryville, said lawmakers should consider putting the tax change on the ballot and leave the decision up to voters.
One Democrat in the legislature — Rep. Chris Kelly, D-Columbia — has proposed a five-year reduction of the income tax to be replaced with a sales tax increase.
-Missouri Digital News