The following op-ed was printed in the March 29, 2011 Columbia Daily Tribune. The op-ed was in response to an editorial by Hank Waters published on February 5, 2011.
Income tax repeal plan is workable
Tennessee shows Missouri the way.
BY CARL BEARDEN
Tuesday, March 29, 2011
Tribune editorialist Hank Waters seems convinced it would make sense to replace the state’s income tax with a broad-based sales tax, but he’s not quite convinced enough to support it. I believe there are answers to his primary concern.
First, let me address briefly the issue; there are plenty of misconceptions about the various income tax repeal proposals. My group primarily endorses an initiative petition filed in January that we call the Missouri Jobs Act. In general, the nine petitions (which likely will be reduced to one) call for repealing Missouri’s 6 percent income tax and replacing it with a broad-based sales tax capped at 7 percent.
The sales tax would apply to virtually any service or retail transaction made by an individual. Waters likes this idea, and so does United For Missouri because we know it works. Tennessee has no income tax, and it also has a broad-based sales tax (though not as broad as the Missouri Jobs Act) capped at 7 percent.
And Tennessee has boomed. Its population and economy have been growing faster than Missouri’s for three decades. Tennessee pays its teachers more than Missouri, and its property tax rates are lower. What’s most telling for me is that, until the late 1960s, Tennessee lagged Missouri. That’s when Missouri’s income tax really started to take hold as household incomes began to rise past $9,000. Why is that an important amount? The top income tax rate kicks in at $9,000.
When Missouri raised its top rate from 4 percent to 6 percent in 1971, income tax collections really took off. Tennessee began closing the gap at an even faster pace as Missouri’s growth rate slowed.
Tennessee works and works well. United for Missouri thinks Missouri can do even better by applying the sales tax even more broadly than Tennessee. Supporters of the Missouri Jobs Act want to eliminate the winners and losers that tax policy too often creates.
But Waters is concerned the legislature will quickly begin adding exemptions to the sales tax. That is unlikely. Under the Missouri Jobs Act, it would take a two-thirds vote by the Missouri House and Senate to carve out an exemption. As a former state legislator, I can tell you that’s a high bar.
The income tax is an economy-killer, and there are plenty of alternatives from which to choose. We think Tennessee has shown the way and shown up Missouri at the same time. And we think we’ve devised an initiative to limit the dreaded exemptions that understandably concern Waters.
Carl Bearden is the executive director of Springfield-based United for Missouri. He lives in St. Charles.
The following charts demonstrate the growth in population and in state GDP referenced in the op-ed. Change can be a frightening thing but it does not mean it will be a bad thing. Tennessee is a working model for the tax reform being proposed.
A no individual income tax model works in the Volunteer State and there is absolutely no reason to think it won’t work in Show-Me State!