Missouri ballot proposals would end income tax, replace it with higher sales tax

Whether Missourians should be taxed based on the work they do or the items they buy may be decided by voters next November.

Two initiative petitions to eliminate income tax paid by individuals and corporations and raise sales taxes in Missouri were approved this week by the Missouri secretary of state's office.

The difference between the two petitions is that one offers a tax credit for eligible homeowners.

Both would eliminate taxes paid based on income or earnings by corporations and individuals and in exchange allow the legislature to increase taxes up to 5.5 percent on food and 7 percent on other items and services. It would require that state and local cumulative sales tax not exceed 10 percent. The measure exempts essential items like health care, child care and rent.

The measure, according to the secretary of state's office, would increase the state's general revenue by $300 million, or decrease it by up to $1.5 billion, depending on the amount of goods and services purchased. It's estimated to increase state operating costs by at least $12.8 million, but its impact on local governments is unknown, according to the language of the petition.

About 60 percent of Cape Girardeau County's operating funds come from sales taxes, Treasurer Roger Hudson said.

"In particular since we are a border state, Illinois people might not be as likely to come over here and shop if they don't have the same level as sales tax," Hudson said.

When Cape Girardeau County shoppers make purchases, a 4.225 percent sales tax is paid to the state and a one-cent tax is paid to Cape Girardeau County. No property taxes are used to fund county operations, Hudson said. The remainder of county revenue comes from fees collected by county offices.

Missouri residents living near the borders would likely choose to shop in other states that had lower sales taxes, said Dr. Bruce Domazlicky, director of the Center for Economic and Business Research at Southeast Missouri State University.

Some people may choose not to avoid the sales tax by not spending as much money, he said.

"This is something that the wealthy are better positioned to do than low-income individuals who typically spend all of their income," Domazlicky said.

Higher income groups are likely to see their state tax burden reduced, while lower income individuals will likely see an increase, he said.

Supporters of the initiative they call the Missouri Taxpayer Relief Act must collect signatures from about 120,000 registered voters by May 6 to make it onto the November 2012 ballot.

The initiative is spearheaded by the Let Voters Decide coalition headed by St. Louis businessman Rex Sinquefield. He donated $1.5 million to the Let Voters Decide campaign fund last week. Let Voters Decide was also the driving force behind a ballot measure that passed last year requiring St. Louis and Kansas City voters to reauthorize municipal earnings taxes. Sinquefield contributed $10 million to that Let Voters Decide campaign effort.

In a news release earlier this month, Let Voters Decide said the initiative would help retain and attract businesses.

Domazlicky said eliminating corporate earnings taxes won't necessarily attract businesses on its own because many factors are considered when selecting locations.

"Taxes are only one part of the equation," he said. "Businesses located in other states that are now close to Missouri may give relocation to Missouri some consideration."

The Missouri Chamber of Commerce and Industry recently surveyed its members about how they felt about eliminating income tax and replacing it with an increased sales tax.

Forty-one percent of respondents agreed it was a good idea, while 47 percent disagreed with the concept. Twelve percent were neutral.

However, 45 percent of chamber members surveyed said that eliminating income tax and replacing it with a moderate sales tax increase could be used as an economic development tool to attract businesses to the state.

When asked if they believed the proposal would harm their businesses, 45 percent said yes, 37 said it would not affect their business and 18 percent said it would help their business.

mmiller@semissourian.com

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