HJR 36: Restore justice to the Missouri tax code!

Author: Jared Fallon

For more information, see www.mofairtax.com 

 HJR 36, The MO Fair Tax plan, is a proposal to restore personal liberty, government transparency and fiscal accountability back into Missouri’s tax code.

It results in a real pay raise for residents, empowers the state’s economic engine and shifts the entire business system from taxation to customers and employees.

Ed Emery’s Fair Tax plan is a reform for the better, and truly seeks to restore Missouri’s competitiveness.

But what exactly is the MO Fair Tax?

HJR 36 seeks to ask the voters of Missouri to decide on a plan to replace the state income tax with a consumption (usage) tax. If put into law, the bill would raise the sales tax by 1.1% and broaden the scope of the tax to include personal and property and taxable services. The Missouri General Assembly would be allowed to make one adjustment to the rate to make it revenue/spending neutral.

Despite Emery’s plan to ensure Missouri’s economic growth, many people are questioning the timing of his proposal.

At a time when layoffs and fears of economic recession are commonplace, why would Missourians want to reform the state’s tax code?

The reason, sadly, is that Missouri is falling 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.