MISSOURI: Montgomery Archives

Story by Tim Sampson
Missouri News Horizon

Supporters in favor of abolishing Missouri’s individual income tax in favor
of an enhanced sales tax say they are committed to getting the issue on November’s ballot.

Supporters of the so-called “Fair Tax” initiative argue a radical change is necessary to the state’s tax code in order to grow Missouri’s economy. They argue the income tax – the state’s largest single revenue source – can be replaced with a 7 percent state sales tax. But opponents of the plan call it little more than magical thinking by pro-business groups.

“Missouri’s GDP growth is 48th in the nation and we think that’s just unacceptable,”
said Anne Marie Moy, a spokesperson for Let Voters Decide, an activist group seeking to put the issue on the ballot.

Speaking at a debate in the state capitol this week sponsored by the Associated Press and the Missouri Press Association, Moy compared Missouri to some of its neighboring states to make the case for abolishing the income tax.

Let Voters Decided has received about $2.5 million from Missouri businessmen and conservative political activist Rex Sinquefield to help advance the issue.

Under their proposal, the income tax would be abolished and the state sales tax would be raised from 4.25 percent to a 7 percent maximum rate. The plan would also cap local sales tax rates at 3 percent.

Moy argued in favor of her organization’s plan, showing that states such as Tennessee, Washington and Texas that don’t have personal income taxes have had stronger GDP growth in the last 50 years, ranking 20th, 15th, and sixth in the nation respectively.
She also pointed toward neighboring Illinois as an example of the negative effect of income tax, saying the state has experienced significant job loss since significantly raising its tax rate at the start of 2011.

“Every three minutes, Illinois loses a job since implementing this tax
increase,” she said.

But opponents of the legislation accuse Moy and others of twisting the facts from other states to help support their cause. Jim Moody, a lawyer for the opposition group Missourians for Fair Taxation, argued that the plan as currently proposed in Missouri would not compensate for the loss of income from abolishing the income tax.

“Missouri government tax revenue is like a three-legged stool and they’re
trying to pull one of the legs out from under it,” Moody said.

He noted that Tennessee, often cited as the golden boy example of what could happen if Missouri were to eliminate its income tax, has a number of other revenue streams
that Missouri does not. Tennessee has an income tax on interest and dividends, a privilege tax, gross receipts tax, franchise tax, excise tax and business tax that all
add $2.4 million annually to the state budget.

Moody also pointed out that even though Tennessee’s GDP growth may be stronger, Missourians still enjoy a higher average per capita income $36.979 compared to Tennessee’s $35,307.

He also said that many local governments in Missouri that currently have a sales tax
rate above 3 percent would suffer, towns like Warrenton, Clayton and Kansas City among others.

“The basic premise of all this is that you can eliminate the individual income tax, replace it with an increased rate of less than 3 percent, slightly broadening the base and replace all existing revenue,” Moody said. “And that’s not true.”