Amy Blouin, executive director of the Missouri Budget Project, warns that proposal would increase the financial burden on Missouri families. She explains the proposed rate would be higher, and would apply to services not currently subject to sales tax, such as child care, health and dental care, prescriptions and rent. At the same time, says Blouin, replacing the state income tax with the 'fair tax' will not ward off cuts to the state budget.
"When you really dig into it, it's a significant increase for the average person in taxes – but at the same time, it does not increase revenue and could diminish revenue in the state, dramatically."
To make sales tax income match our current income tax revenues, it is estimated that the statewide sales tax would have to be approximately 6 to 7 percent, up from the current 4.225 percent. In the first year of the phase-in, the proposal caps the amount of the sales tax at 7 percent. However, the language within the current proposal would allow the legislature to increase the state sales tax rate above that amount as the changes are phased in, without a vote of the people.
Missouri's new sales tax rate would be significantly higher than neighboring states. More significantly, no other state taxes services such as child care and health care as broadly as Missouri would under the current proposal.
Here is how the proposed tax rate of Missouri would compare with our neighbors:
- Proposed Missouri Sales Tax Rate: 7 percent (first year)
- Arkansas: 6 percent
- Iowa: 5 percent
- Illinois: 6.25 percent
- Kansas: 5.3 percent
- Kentucky: 6 percent
- Nebraska: 5.5 percent
- Oklahoma: 4.5 percent
- Tennessee: 7 percent