Wouldn't it be nice if Missouri could magically find the money needed to pay for services people need and to make the sort of investments that help build a prosperous future?
That's pretty much what some state lawmakers are proposing. Wave a magic wand and - poof! - the state income tax disappears. Wave it again and - poof! - corporate taxes disappear.
How would reducing revenues get us the money we need?
The taxes that supporters of this plan would eliminate, took in almost $9.4 billion in 2008.
To make up all of that through only a sales tax would mean taxing far more purchases than is the case today; in fact, far more than any other state taxes.
According to the language of the proposals, we could see a new sales tax on nursing-home care, doctor's office visits, child day-care services, purchases of new homes, funerals, food and prescription drugs, legal counseling and financial services, private K-12 school tuition and much more.
Not only that, but the sales tax rate itself would have to go up dramatically in order to offset the money lost from ditching other taxes. That means what we pay in sales tax on items already taxed would have to be increased as well. Recent estimates show that to fully replace lost revenue, the new sales tax rate would need to be approximately 11 percent -- not the 5.11 percent rate stated in the legislation.
Eliminating individual and corporate income taxes and replacing them with a greatly expanded sales tax would in fact be a bad deal for the vast majority of Missouri families, while also threatening the state's ability to meet future needs.
The sales tax rate itself would have to go up dramatically in order to offset the money lost by eliminating the other taxes. And it is clear who would bear the brunt of that increased tax rate: middle-income Missourians.
Putting all of our eggs in the sales-tax basket would be a risky strategy, especially in tough economic times like these. No tax structure is perfect during a recession, but a diversified approach - sales and income taxes; taxes on businesses and individuals - has proved through the years to be the strongest.
Blouin is executive director of the Missouri Budget Project.
Lake of the Ozarks, Mo. —
