Mega Sales Tax Proposal
Update on Initiative Petitions
Sunday, May 6, marked the deadline for submission of signatures for initiative petition measures to be presented to the voters in November. None of the nine versions of the mega sales tax initiatives were submitted. The Missouri Secretary of State: News Release contains a complete list of initiatives that were submitted.
At this point, there have been no public statements from either the opponents or proponents on next steps. MSCPA’s Board of Directors remains committed to working toward comprehensive tax reform.
Status Update: Missouri Judge Finds Ballot Language Unfair and Prejudicial
On Friday, April 13, 2012, Cole County Circuit Judge Patricia Joyce ruled the proposed constitutional amendment’s ballot descriptions to overhaul Missouri’s taxes are insufficient because they deceive voters with biased wording about the measure’s cut of $7.5 billion in vital state general revenues.
As a member of two coalitions opposing a mega sales tax, the MSCPA recognizes the need for tax reform and continues to monitor the issue through its Tax Reform Policy Committee and with MSCPA Government Relations Consultant Chuck Pierce.
The following articles contain additional details:
Mega Sales Tax Proposal
It has been called the Fair Tax or the Taxpayer Relief Act by supporters. Opponents have dubbed it the Almost Everything Tax, and the Everything Tax. However you phrase it, two versions of an initiative petition have been approved for circulation by Secretary of State Robin Carnahan to eliminate Missouri state taxes paid by individuals based on income or earnings, prohibit new local taxes on income or earnings, and eliminate Missouri’s existing sales and use tax laws, and replace them with an expanded tax on nearly all sales of property and services.
Petition signatures are needed by more than 8 percent of total votes cast in the 2008 Missouri Governor’s election from six of the state’s nine congressional districts by 5 p.m. on May 6, 2012, for this issue to be placed on the November 2012 election ballot.
The MSCPA Board of Directors encourages you to educate yourself fully on the matter and will provide resources throughout the process to assist you. Once the final version of the petition has been determined, it will be posted.
Background
At the request of the MSCPA Board of Directors, a Tax Reform Policy Committee has been appointed to study the impact a “Mega Sales Tax” would have on CPAs, local business, and Missouri’s economy. In addition, the group has been charged with spreading awareness of the issue to MSCPA members, as well as to their organizations, clients, and the public at large.
The MSCPA Board of Directors has consistently expressed concern with such proposals because they contain too much uncertainty and lack flexibility for future amendments. While there are differences between the proposals, some consistent items remain throughout each, which have created the basis for these concerns:
- All versions of the petitions would result in amendments to the state constitution instead of a change to state statute. Any future changes to sales tax exemptions would require either a 2/3 majority of the legislature, or a vote of the people. This removes much flexibility for modifications to be made as needed by the legislature. In light of the dynamic nature of sales taxes and transactions, this lack of flexibility creates a high probability of unintended consequences.
- All proposals create a great deal of uncertainty surrounding the implementation and guidance of tax policy. By removing all existing precedent regarding sales tax without thorough guidance, CPAs and their clients would have to operate in a very uncertain tax environment. This uncertainty is compounded by the inability to make adjustments to future court decisions.
- MSCPA believes tax reform of this magnitude should be done in a deliberative and measured process, receiving input from all stakeholders. These proposals are drafted by the sponsors. In each of the last three legislative sessions, the sponsors have been unable to answer questions and resolve uncertainty to the satisfaction of the Legislature. This demonstrates that the existing proposals do not represent a consensus view of all the stakeholders.
- The Missouri State Auditor’s Office estimates that the shift from an income tax to a sales tax could reduce state revenue by as much as $1.3 billion a year or result in an increase of up to $300 million a year. The wide range of this estimate demonstrates the high degree of complexity surrounding the proposals and makes it very difficult for the state to effectively budget.
- This is being portrayed by sponsors as a simpler tax structure. Removing the state’s income tax does nothing to reduce the complexity of the federal income tax structure. All existing federal income and payroll tax requirements remain. To say that removing the state income tax and replacing it with a broader, more complex sales tax simplifies reporting for businesses is at best inaccurate, and at worst misleading.
- Broadening of the state’s sales tax base and increasing the rate could drive sales to adjoining states and the internet thereby harming the state’s economy.
Over the past two years, the MSCPA Board of Directors has issued the following statements:
Collaborative Efforts
The MSCPA has joined forces with two coalitions, Missourians for Fair Taxation and Coalition for Missouri’s Future, established in opposition of the tax shift. Each organization has its own reasons for belonging to the coalitions. The society does not fully endorse all of the views expressed by the coalitions and their members, but finds value in working together to promote the need for a well-thought-out approach to tax reform. See each group’s website for further information and resources.