HCS HJR 8 -- MISSOURI JOBS AND PROSPERITY ACT
SPONSOR: Funderburk (Koenig)
COMMITTEE ACTION: Voted "do pass" by the Committee on Tax Reform
by a vote of 8 to 4.
Upon voter approval, this proposed constitutional amendment
establishes the Missouri Jobs and Prosperity Act that phases out
the state individual income tax and replaces the corporate income
tax, corporation franchise and bank franchise taxes, and state
sales and use tax with a sales tax of up to 7% on retail sales of
new tangible personal property and taxable services. Beginning
January 1, 2015, the state sales tax rate will be 4% and will
gradually increase annually over the next four years to make the
tax revenue-neutral and to provide continued funding for
programs. The individual income tax will decrease 25% per year
until eliminated based on the average collections over a
five-year period. The sales tax on used motor vehicles will be
phased out over a period of time but must be by January 1, 2018.
Property purchased to be a component part or ingredient of a new
tangible personal property to be sold at retail, federal
government purchases, business-to-business transactions including
agriculture, purchases for investment, tuition and fees for
education, purchases of motor fuel when subject to an excise tax,
certain insurance premiums or fees, and purchases of used
tangible personal property will be exempt from the new sales tax
while all other exemptions will be eliminated. No tax credits
will be authorized after January 1, 2015; and no authorized tax
credits, other than the senior citizens property tax credit, will
be allowed after the elimination of the individual income tax.
The conservation sales tax, the soil and parks sales tax,
Proposition C sales tax, and local sales taxes will be
recalculated to produce substantially the same amount of revenue.
Each qualified household member will receive a sales tax rebate.
The amount of the annual rebate will be calculated on purchases
of $2,800 per taxpayer until January 1, 2019, when the amount of
purchases the rebate is calculated on will be increased based on
the increase in the federal Consumer Price Index in the previous
The resolution provides a process for the approval or rejection
of the State Treasurer's recommendation for the adjusted state
sales tax rate by the General Assembly and modification of
existing state taxation statutes by the Revisor of Statutes.
FISCAL NOTE: Estimated Net Effect on General Revenue Fund of an
income of $0 or a cost of more than $7,000,000 in FY 2012, an
income of $0 or a cost of $211,499 in FY 2013, and an income of
$0 or a cost of $855,902 in FY 2014. No impact on Other State
Funds in FY 2012, FY 2013, and FY 2014.
PROPONENTS: Supporters say that the bill authorizes a tax on
consumption not prosperity, is revenue-neutral, creates jobs
through a business-friendly environment, and lowers the cost of
doing business in Missouri. The current 3% sales tax for general
revenue will be reduced to 1.8% if services were taxed. When
businesses are taxed, they add the tax to their product's price
or move to a lower taxing state. The bill will increase tax
compliance since sales tax is more accurate and enforceable. The
bill will be good for small business because it will eliminate
the costs of withholding state income tax and filing and
remitting the withholding tax and corporate income tax.
Currently, Missouri has the lowest sales tax of its surrounding
states. Nine states have no income tax and show economic
vitality including greater job growth, higher wages, higher gross
state product, and population growth compared to states with
income taxes. On average, states without an individual income
tax have outperformed states with the highest income tax rates by
26.5% over the past decade and outperformed the national average
by 20%. Without an individual income tax, Missouri could
potentially add $100 billion to its gross state product.
Tennessee has had a similar tax structure to the fair tax for 60
years and it is working. The bill will tax approximately 45% of
Missouri's gross domestic product which is more than sufficient
for the state budget and a more stable revenue source than
currently exists. Counties and cites will get a more broadened
base so taxes will not be so volatile. The state income tax
structurally promotes poverty, discourages industry, and rewards
unwise fiscal behavior. The elimination of the state income tax
and the replacement with a broad-based sales tax will be a major
step toward a less powerful and intrusive government and an
Testifying for the bill were Representative Koenig; Randy
Gastineau; Frederick Berry; Ed Emery; United for Missouri; Robert
Hillman, Missouri Republican Liberty Caucus; Philip Todd; Shirley
Braden; James Naylor; John McMillen; Anna Voelker; James Coyne;
Erin Dunn; Dr. Colin Malaker; Barbara Webb; Alice R. Forker; E.
L. Forker; Beverly Martin; John Richard Martin; Denise Hubbard;
Mitchell Hubbard; and Earl Williamson.
OPPONENTS: Those who oppose the bill say that it could bankrupt
the state and the middle class, has not been tried anywhere to
date, and could have unintended consequences. It will shift the
tax burden to the poor and lower middle class, cut funding of
state services that assist Missouri's most vulnerable citizens,
and not provide adequate or sustainable revenues for public K-12
and higher education. Currently, the state sales tax brings in
$7 billion annually at 3%. The fair tax adds a tax to food,
rent, utilities, child care, beauty care, attorney fees, and
healthcare. The prebate is too expensive and will cost $2
billion annually requiring the tax rate to be increased by 2-3%
just to cover the prebate. The Missouri Budget Project estimates
the tax rate needs to be 12%. The local rate calculation is
problematic since it uses a five-year, look-back period and
allows only one chance to adjust the rate. Last November, voters
passed a constitutional amendment that prohibits the imposition
of any new tax. If the bill passes, it is sure to be litigated.
Taxpayers will cross the state line or shop online to save on
taxes especially in the Kansas City and St. Louis areas. A tax
on services could place businesses at a competitive disadvantage
with businesses in adjoining states. There is no correlation
with tax rates and productivity, and some states with higher
taxes than Missouri have a higher growth in gross domestic
product. Sales tax is not a consistent source of revenue.
Streamline sales tax or a strengthening nexus should be pursued.
Testifying against the bill were Missourians for Tax Fairness;
Missouri Association of Realtors; Missouri Budget Project;
Missouri Retailers Association; Missouri Municipal League;
Greater Kansas City Chamber of Commerce; Partnership for
Children; Missouri Catholic Conference; Missouri National
Education Association; Missouri Society of Certified Public
Accountants; Penney Rector, MESA - School Administrators
Coalition; Catholic Charities of St. Louis; Cooperating School
Districts of Greater St. Louis; Missouri Society of Accountants;
Missouri Broadcasters Association; Missouri Association for
Social Welfare; Kelly Anthony, Missouri Jobs with Justice;
Cooperating School Districts of Greater Kansas City; Missouri
Hospital Association; and AARP Missouri State Office.
Copyright (c) Missouri House of Representatives
Missouri House of Representatives
96th General Assembly, 1st Regular Session
Last Updated August 9, 2011 at 1:29 pm