Officials offer tax changes by Chad Livengood for SNL

Officials offer tax changes State representatives look to change sales tax, eliminate income taxes. Jefferson City -- A duo of unlikely partners pitched a plan on Wednesday to eliminate the state's personal and corporate income taxes and replace them with a flat state sales tax. Rep. Ed Emery, R-Lamar, and Rep. Chris Kelly, D-Columbia, presented separate bills to a House committee that advocate for the creation of a system that taxes people based on how much they consume, not how much they earn. Emery's bill calls for raising the state sales tax from 4.225 percent to 5.11 percent and eliminating the 6 percent personal income tax and 6.25 percent tax on business earnings. The tax structure is what's known as a "fair tax," because it taxes people equally based on their spending and gets rid of all exemptions and refundable tax credits. "To me, fair is people who spend more, pay more," said John Putnam of Carthage, co-director of Americans For Fair Taxation's Missouri chapter. Critics of fair tax systems latch on to the higher tax rate -- in this case, nine-tenths of one percent -- as evidence that it would raise the price of everything from food to cars. But Emery said a fair tax system would take the income taxes that businesses pass on to consumers out of the price of goods and services. "When, in fact, we remove the income tax on business, their cost of production goes down," Emery told the House Tax Reform Committee. "(Consumers) might actually see price decreases." In separate testimony, Kelly said a sales-tax-only system of supporting government services is more efficient and "popular" with taxpayers than withholding money from their paycheck each week. "I believe the sales tax is one thing conservatives are right about," said Kelly, one of the more liberal members of the House. Kelly also said the income tax system encourages people to cheat by finding every possible deduction, even if they don't really qualify for it. "It's much, much harder to cheat the sales tax than it is to cheat the income tax," Kelly said. Critics of the fair tax plan said it would place more tax burden on low-income Missourians. "It's a brilliant label, but I don't find any fairness in this," said Rep. Jeanette Oxford, D-St. Louis. Oxford said corporations wouldn't pay their "fair share" of taxes, which she considers "patriotic dues" to society. To offset taxing basic necessities, Emery's proposal would create the distribution of a monthly tax rebate check to cover the cost of any taxes incurred up to the federal poverty level, which is $10,830 a year for an individual and $22,050 for a family of four. If approved by the legislature, Emery's proposal would go before voters in a November special election. If voters approve the change, it would become law Jan. 1, 2011. Kelly's bill would require the Department of Revenue to study the implementation of a flat sales tax to replace income taxes and submit a report to the legislature by January 2011. The following year, the tax system would be changed. Nine other states do not tax income. Supporters of the fair-tax plan presented data showing a tax system that relies solely on consumption can weather rough economic times such as the current recession. That's despite the fact that Missouri's sales taxes have declined in recent months, while income tax collections have remained steady. Emery and Kelly's proposals would eliminate all current exemptions in sales tax, from luxury items like dock fees and country- club memberships to things as simple as fence posts and barbwire for fencing in cattle. One representative raised concerns about farmers losing out on numerous sales tax exemptions . Emery and Kelly said their proposals would expose many indirect subsidies carved into the tax code for farmers and other special interests that have powerful lobbying operations in the Capitol. "If the government wants to subsidize those purchases, then we'll have to do it directly," Emery said. Wednesday's hearing on the issue lasted more than three hours. It had to be split into two separate hearings because House members had to go to morning session. Groups speaking in opposition of the bill included the Missouri National Education Association teachers union and Missourians for Tax Justice, which favors tax laws that levy higher income taxes on the rich. The teachers union is concerned about the flow of tax revenue to the state declining with just a sales tax in place, even though schools are mostly supported by property taxes. Springfield resident Ed Plaster spoke in favor of the bill, saying it would help his adult children who are struggling to make ends meet after taxes are deducted from their paychecks. "Whether you consider it fair or not, it is family- friendly," Plaster told the committee. -- http://MissouriNetizen.com http://www.bransonedge.com http://www.bransonmissouri.missourinetizen.com