Just last year we brought you news of the misguided proposal that would have eliminated Missouri's personal and corporate income taxes and replace that revenue with an expanded sales tax. The proposal, called by some the "Fair Tax," would create a mega sales tax that would supposedly have a lower rate, but would be levied on everything from rent to child care and even food (which is currently not taxed through the state sales tax).
Last year, the plan passed the House of Representatives, but failed in the Senate, which was a really good thing given ITEP's findings that the legislation would have meant a net tax increase for all income groups except the richest 5 percent. We also found that if the proposal was really going to be revenue-neutral (as proponents claim) while also providing 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.
Despite damning evidence from both ITEP and the Missouri Budget Project, proponents of the "Fair Tax" are at it again. This week both opponents and proponents of the legislation testified in the Missouri Senate, including Dr. Arthur Laffer, a rabid anti-taxer, who reportedly said, "I mean, all taxes are bad." Keep your eyes peeled on this state tax battle, which is likely to receive a lot of attention nationally.