A proposal to phase out income taxes in Missouri in favor of a state sales tax of up to 7 percent is among the bills still in the legislative hopper in Jefferson City as state lawmakers work with less than three weeks left in this year's session.
HJR 8, also known as the Missouri Jobs and Prosperity Act, was introduced by State Rep. Andrew Koenig, R-Winchester. It would put to state voters the question of whether to replace individual and corporate income taxes—along with state sales and use taxes—with a sales tax of up to 7 percent, a summary of the committee version of the bill states.
The new sales tax rate would take effect in January 2015 at a level of 4 percent and be increased over a four-year period "to make the tax revenue-neutral and to provide continued funding for programs," the summary states. Individual income tax would decrease at a rate of 25 percent per year.
Creve Coeur State Rep. Jill Schupp called Patch by phone from the floor of the Missouri General Assembly last week to say she was opposed to what she called the "Mega Tax Bill". She's concerned about the services and other areas which would be taxed under the legislation, including medication, education and child care. "Frankly, I think people in my district would be outraged," she said.
She disagrees with the language in the bill which says the sales tax would be up to 7% on retail sales of new tangible personal property and taxable services, claiming that some economists say it could actually be two or three times that amount.
Schupp also said the tax could be enough to push some consumers across state lines, a sentiment also expressed by Creve Coeur City Administrator Mark Perkins, although the city has taken no formal stance on the legislation.
Perkins said the St. Louis Municipal League was an organization the city often turns to to represent city interests, and the league has come out in opposition to the legislation.
"We don't see any benefit to it," the Leauge's Assistant Director Steve Ables said. High sales taxes resulting from the legislation could drive Missouri shoppers into Illinois and Kansas in search of lower prices, he said. That's particularly true for purchases of "big-box items" such as washing machines and refrigerators, he said. It's also unclear how city services would be affected because of uncertainty over how much revenue the legislation would generate for the state.
Executive director Tim Fischesser has been lobbying against the measure in Jefferson City, Ables said.
The Municipal League has written a policy statement in opposition of legislation such as HJR 8.
"The League opposes the use of a higher sales tax rate to replace the corporate and individual income taxes," the policy states in part. "Missouri's cities rely upon sales taxes for general fund and enterprise fund operation. If the state sales tax rate is dramatically increased, municipalities would be crippled in seeking voter approval of new sales taxes and Missouri businesses would lose retail to adjoining states and the Internet."
The bill has been laid over since April 12, and a hearing has not been scheduled. It's not clear whether the issue will again be discussed before the close of the legislative session, which ends May 13.
State Rep. Stacey Newman, D-Richmond Heights, said she and other Democratic legislators are proposing amendments to highlight what she described as loopholes in the bill.
"If you're wealthy, this is a fabulous thing," Newman said. "If you're not wealthy, this is a horrid thing."
She said the legislation would represent a tax increase for 95 percent of Missourians. Among the reasons the bill concerns her: Food purchased for home consumption would not be exempt. She said the state's current sales tax rate of 1.225 percent on those types of purchases could increase to 7 percent, referring to estimates from the Missouri Budget Project. The rate could go higher once local sales taxes are factored in.
Other nonexempt purchases would include rent, child care and Girl Scout Cookies, she said.
But she said it's her understanding that a majority of the Democratic caucus are opposed to the measure and that some freshmen Republicans are having second thoughts.
"There's not full-fledged support to get this out," Newman said.
It's unclear when House members will again review the legislation. They have done so twice for 10 minutes at a time, Newman said.