HCS HJR 36 -- FAIR TAXATION

SPONSOR:  Smith, 14 (Emery)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Tax Reform
by a vote of 7 to 5.

Upon voter approval, this proposed constitutional amendment
replaces the state individual and corporate income tax and state
sales and use tax with a fair sales tax of 5.11% on retail sales
of new tangible personal property and taxable services beginning
January 1, 2012.  The General Assembly can make one adjustment to
the rate after the imposition of the tax to adjust the amount of
revenue received to make the tax revenue-neutral and to provide
continued funding for programs.  A component part or ingredient
of a new tangible personal property to be sold at retail, federal
government purchases, and business-to-business transactions
including agriculture will be exempt from the new sales tax while
all other exemptions and tax credits will be eliminated.  Any new
exemptions will require a 2/3 affirmative vote by the General
Assembly and approval by the Governor.  The conservation sales
tax, the soil and parks sales tax, and local sales taxes will be
recalculated to produce substantially the same amount of revenue.
Each qualified family will receive a sales tax rebate based on
the federal poverty level guidelines to offset the sales tax on
basic necessities.

FISCAL NOTE:   Estimated Effect on General Revenue Fund of an
income of $0 in FY 2010, an income of $0 or a cost of More than
$100,000 in FY 2011, and an income of $0 or a cost of Unknown in
FY 2012.  No impact on Other State Funds in FY 2010, FY 2011, and
FY 2012.

PROPONENTS:  While testifying in support of the substitute,
supporters say that the substitute bill eliminates income tax for
individuals and corporations, state sales and use tax, some
exemptions, and all tax credits and provides a pre-bate for the
basic needs of Missouri families.  The departments of
Conservation and Natural Resources sales tax rate can't be
adjusted because they are established in the Missouri
Constitution.  The substitute addresses the rates for these two
and also for education.  It removes estate tax from the fair tax
since the federal government would get the state money if the
state has no estate tax; requires local taxing districts to
adjust their rates; adds exemptions for the federal government,
business-to-business, and agricultural; and takes monthly out of
the pre-bate requirement.  The effective date was changed to
allow local governments time to adjust their rates, and
exemptions will take a two-thirds vote to be added back.  The
fair tax takes away the government's ability to control behavior
with taxes, credits, and exemptions.  People want a tax system
that is fair to all and simple to calculate.  The substitute will
improve these areas of our current income tax system and
completely not tax people with income below the federal poverty
level.  The wealthy who buy more will pay more taxes.  The
substitute makes the processing approach much better.  Tennessee
is still a good model for Missouri.  There will be growth here
without an income tax and no negative impact.  For a family of
four, $26,000 is the poverty level.  So a family of four making
$40,000 would pay tax on only the difference of $14,000.  Three
principles are met with the substitute:  broad-based, simple, and
ease of collection.

Testifying for the substitute bill were Representative Emery;
James Naylor; John Putnam, FairTax.org; Americans for Prosperity
and Foundation; and Gerald Wadel.

OPPONENTS:  While testifying in opposition to the substitute,
those who oppose the substitute bill say that the tax is designed
as a federal system and not a state tax system.  Missouri will
have people crossing into other states to make their purchases to
avoid the tax.  The elimination of income tax and replacement
with a sales tax shifts taxes from wealthy taxpayers with the
ability to pay down to lower and middle class taxpayers and
eliminates diversity of taxation for the state.  This will make
Missouri's tax code more regressive and less fair.

Testifying against the substitute bill were Missouri Association
of Realtors; Missourians for Tax Justice; and Missouri National
Education Association.

Missouri House of Representatives
95th General Assembly, 1st Regular Session
Last Updated November 17, 2009 at 9:26 am