Study: "Fair Tax" Would Cost Missouri $2.5 Billion, Reduce General Revenue By a Third

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Latest analysis predicts dire consequences of "fair tax."
Latest analysis predicts dire consequences of "fair tax."
Updated with response from the Show-Me Institute.

The Missouri Budget Project is out with a new study that it says shows that several "fair tax" proposals for Missouri would cost the state billions.

The report suggests that the efforts of financier Rex Sinquefield to replace Missouri's income tax with higher sales taxes would lead to a shortfall of at least $2.5 billion in general revenue -- about one-third of the state's total general revenue.

The study suggests that replacing income taxes with sales tax would cause funding for public schools to be slashed by roughly $868 million. Social services and Medicaid would lose almost $466 million, according to the Missouri Budget Project. Higher education would be cut $291 million. Public safety, prisons and the courts would lose almost $272 million. Programs for senior services, health and mental health would be cut nearly $263 million. And the state Departments of Transportation and Agriculture would each lose about one-third of their general revenue funding.

"The irresponsible new sales tax structure would require devastating cuts to the services that enable Missourians and Missouri businesses to thrive," said Amy Blouin, executive director of the Missouri Budget Project, in a statement this morning. "These services provide the foundation of our economy and allow us to remain economically competitive nationwide."

Today's report is the second study to suggest devastating impacts from replacing the state's income tax with higher sales taxes.

Daily RFT has a request out with Sinquefield's think tank, the Show-Me Institute, for comment and response to the Missouri Budget Project's analysis.

David Stokes, policy analyst for the Show-Me Institute, says he can't directly refute Missouri Budget Project's report because it doesn't provide explanation for its findings.

"They didn't provide any footnotes or data on how they reached their conclusions," says Stokes.

Sinquefield's Let Voters Decide initially filed 9 different ballot initiatives calling on an end to the state income tax. Four of those ballot initiatives remain on the books, though none has been approved for the November 2012 ballot and all provide somewhat different rules on what would and would not be subject to increased sales tax.  "At this point, it's possible to come up with all kinds of scenarios," says Stokes.

Stokes says that Sinquefield's campaign initiative Let Voters Decide should come up with its final ballot initiative soon.

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