|The House Committee on Tax Reform on February 9, 2011, during a public session heard HJR 8, which would propose a constitutional amendment to eliminate the state’s individual and corporate income tax and replace it with a greatly expanded sales tax. This “mega sales tax” is unwise public policy, and the committee should reject this risky experiment. Because the tax rates called for in the proposal will be insufficient to replace current revenue, depending on the tax rate and exemptions, the state could see a shortfall of more than $3 billion, causing devastating budget cuts.
According to Andrea Routh, executive director of the Missouri Health Advocacy Alliance, "in order to make up for the revenue lost from the income tax, sales taxes would be applied to a much broader range of goods AND services than are currently taxed. Missourians should not be fooled by this 'wolf in sheep’s clothing." This is not the current sales tax, but a sales tax unlike any other, anywhere. If we think that accessing services is expensive today, it’s nothing compared to what the cost of a dental visit, doctor’s office visit or prescription medications would be under this proposal.”
In addition to being applied to such a broad range of goods and services, the tax rate itself would be much higher. Under the proposal, the sales tax rate may be as high as 12.25 percent for the state sales tax, plus 2.75 percent local sales tax, depending on what exemptions are included.
Craig Eichelman, senior state director of AARP Missouri, expressed his concern about the proposal, saying, “In terms of older citizens and particularly seniors with fixed incomes, this proposal would create excessive burdens because vital products and services for seniors could be subject to the tax including prescription medications, assisted living and nursing home care. Even if these items received a special exemption, the cost on everything else, including food, would have to be even higher.”
The vast majority of Missourians would pay more in taxes under the proposal. A 2010 analysis by the Missouri Budget Project and the Institute on Taxation & Economic Policy found that even with a prebate to every household to lessen the impact of the increased tax, 95 percent of Missourians would actually pay more under this plan than they currently do, making it even more difficult for families to make ends meet.
“The added tax for things like doctor’s office visits and child care will make it increasingly difficult, if not impossible, for parents who are already struggling to meet their kids’ basic needs. It’s sometimes called the ‘choice tax’, but caring for our children shouldn’t be a ‘choice,’” is the opinion of Jeremy LaFaver, director of public policy for the Partnership for Children.
Cuts to education, health care, services for seniors, and the infrastructure that makes Missouri a desirable place to live and work will have a tremendous impact on the state and its future. Brent Ghan, chief communications Officer for the Missouri School Boards Association said, “We are extremely concerned that the so-called "Fair Tax" would have a negative impact on already depleted state revenue and would in turn threaten the future of funding for our public schools."
Education is critical to economic development efforts and the ability to attract jobs to the state. As Dee Ann Aull, director of programs and public relations for the Missouri National Education Association said, “Every school district throughout Missouri, every PTA and every school board should be very concerned about the impact that this proposal would have on Missouri’s ability to provide a comprehensive, quality education. Funding for education would be severely compromised under this plan, weakening further the foundation of our economy.”
If passed, the constitutional amendment proposed in HJR 8 would have to go before voters in November 2012.
Commentary by Amy Blouin, executive director of The Missouri Budget Project