The So-Called "Fair Tax" Approved by Missouri House Would Raise Taxes for All Income Groups Except the Richest Five Percent

In the past month, the Missouri House of Representatives has acted like a spoiled child who really doesn't know what he wants. The esteemed body has voted to permanently reduce the state's income tax rates across the board by half of a percentage point (see ITEP's analysis of HCS for SB 71) and then separately voted to broaden the state's top income tax bracket and increase the costly and poorly targeted deduction for federal income taxes paid (see ITEP's analysis of HB 64).

Then, as if all that wasn't unfair or costly enough, the House decided to also approve the elimination of the individual and corporate income taxes altogether.

Yep, that's right, the full House of Representatives voted to simply eliminate a generator of roughly $5 billion and replace that revenue with a broad-based sales tax that exempts all business-to-business consumption.

Sound familiar? This legislation (HJR 36) is essentially the so-called "Fair Tax" proposal that anti-tax advocates have been pushing enthusiastically across the country. The Fair Tax proposal in Missouri, which would amend the state's constitution, would go before the voters if approved by the Senate.

Today ITEP joined in a release with the Missouri Budget Project highlighting analyses from both groups. ITEP's report concludes that HJR 36 would result in a net tax increase for all income groups except the richest 5 percent. It also finds that if the proposal is to be revenue-neutral (as proponents claim) and is to provide a rebate to Missourians (which they also promise), the new average state and local sales tax rate would have to be 12.5 percent. That's nearly double the 5.11 percent proponents of the bill claim, and it's at least a third more than the sales tax rates of neighboring states.

Missouri Budget Project's report finds that the additional sales taxes levied under HJR 36 would especially harm Missourians living on fixed incomes because they would apply to all services, including utilities, rent, medical care, food, prescription drugs, and child care -- most of which are things no other state makes subject to sales taxes.

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