What is the MO Fair Tax plan?
The MO Fair Tax plan is a reform that would allow Missouri residents to vote on a constitutional amendment to replace the state income tax with a consumption tax. If passed, the plan would raise the sales tax by 1.1% and broaden the scope of the tax to include personal property and taxable services. The Missouri General Assembly would be enabled to make one adjustment to the rate to make it revenue/spending neutral.
When would the plan take effect?
The reform would be fully implemented by January 1, 2012.
How would the plan take effect?
If the amendment were to be approved by voters, the plan would be implemented incrementally. Section 4(d), article X of the Constitution of Missouri would be replaced with new provisions that would omit:
- Withholding taxes and individual and corporate income taxes
- Corporation franchise and bank franchise taxes
- All existing state sales and use taxes
Would the IRS be abolished?
Under the Missouri Fair Tax plan no government agencies of any kind would be eliminated.
Why should I care?
As most people know, entrepreneurship and innovation are two key drivers in every state economy. Sadly, the Show-Me State is beginning to fall behind. The tax system has become far too bulky and government transparency is wavering. Tax evasion is increasing while illegals avoid contributions. The complex tax code distracts from opportunity and discourages small businesses. Items are taxed every time they are sold, no matter how many times they are purchased and many services are not taxable. The solution? A usage tax that doesn’t fault individuals for working.
A single, revenue-neutral sales tax is the answer.
For proof, consider the Show-Me Institute’s report “Tennessee vs. Missouri: Taxes May Tip the Odds.” It states, “By any economic measure, Missouri dominated Tennessee at the end of World War II. Since then, Tennessee has reported faster economic growth and now has higher per-capita income than Missouri. With continued strong growth, the gap will just keep widening.”
The difference between the two states? Tennessee doesn’t have a state income tax.
“Consider two people with identical characteristics, one in Missouri, the other in Tennessee. Suppose those two people were given identical work opportunities, so that they had access to the same machines and plant surroundings. For one hour of work, each produced the same amount, and was paid $20. Excluding federal taxes, the person in Missouri would take home $18.80 while the person in Tennessee would take home $20. The person in Tennessee will supply more labor because he realizes a higher return for his effort.
The difference in returns applies also to those owning machines, plants, and other equipment. Other things being equal, the after-tax return to capital in Tennessee is higher than in Missouri. Consequently, when deciding where to locate plants and equipment, Tennessee has an advantage. Together, the incentives to locate machines and people in Tennessee can account for why the Tennessee economy is performing better than the Missouri.
This is not to ignore other factors that affect the two states’ economic performance. But the comparison does suggest that tax structure does matters. Perhaps it is time to ask: What tax structure is in Missouri’s best interest?”
The answer is the MO Fair Tax.
Am I correct that this bill taxes private k-12 school tuition but not private college tuition? I am of the opinion that we shouldn’t tax any school tuition but why do we wish to tax some school tuition but not all school tuition?
Gene,
The language in this year’s bill simply taxes final sales to consumers, which as a definition included private school tuition. It was not singled out as something to tax. I believe there has been language added to exempt school tuition from the tax base.