HCS HB 2112 -- FAIR TAX ACT OF 2008

SPONSOR:  Smith, 14 (Emery)

COMMITTEE ACTION:  Voted "do pass" by the Special Committee on
Tax Reform by a vote of 8 to 1.

This substitute establishes the Fair Tax Act of 2008 which
requires the Department of Revenue to develop by January 1, 2009,
methods for replacing the state individual and corporate income
tax, corporation franchise tax, bank franchise tax, and estate
tax with a fair tax based on all new retail sales and services.
Upon voter approval, the income tax will be replaced beginning
January 1, 2010, with the department-proposed fair tax.  Sales
tax exemptions and tax credits will be eliminated.  Each sales
tax collector and the department will be allowed to retain
one-fourth of 1% of the amount collected.  Each family will
receive a monthly sales tax rebate based on the number of members
in the family and the federal poverty level guidelines to offset
the sales tax on basic necessities.

FISCAL NOTE:  Estimated Cost of More than $100,000 in FY 2009,
Unknown in FY 2010, and Unknown in FY 2011.  No impact on Other
State Funds in FY 2009, FY 2010, and FY 2011.

PROPONENTS:  Supporters say that states without an income tax are
growing faster than those with an income tax.  Taxes should be
fair and just.  Income taxes are a disincentive to profit.
Investors look for higher returns for their income.  Currently,
there is a loss of jobs to overseas due to our high tax rates.
Ireland eliminated all corporate income tax and now several
companies are moving their businesses there.  The fair tax is a
predictable tax system.  Production costs will decrease with the
fair tax and increase the take-home pay of employees.
Individuals are more likely to save if their take-home pay
increases.  Not taxing the interest earned on savings will be a
great incentive also.  The fair tax will capture cheats and
people doing illegal deeds and eliminate filing errors.  A
monthly rebate check will eliminate the tax for spending up to
the poverty level.  No money will be given to illegal residents.
The fair tax will reward companies and industrious people.  It
does not tax income, only what an individual buys new.  The bill
will benefit lower income groups and help with competition among
businesses.

Testifying for the bill were Representatives Emery and Robb; and
Ray Walker.

OPPONENTS:  Those who oppose the bill say that there are concerns
with the fairness of the tax and tax revenue results.  The sales
tax on services is a good idea since goods are getting harder to
tax.  Sales tax hurts lower income families more than wealthier
income families.  The switch from the income tax to the sales tax
will be a more regressive tax.

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

OTHERS:  Others testifying on the bill say that the department is
not sure what the new rate will be.  The department's records
show who is currently paying the tax but not who would be
required to now also pay the fair tax.  The department will hire
a consultant to determine the impact for the fiscal note.  The
department will shift staff from the income tax area to handle
the new requirements.

Testifying on the bill was Department of Revenue.

Missouri House of Representatives
94th General Assembly, 2nd Regular Session
Last Updated October 15, 2008 at 3:11 pm