HB 1034 -- FAIR TAX ACT OF 2007

SPONSOR:  Emery

COMMITTEE ACTION:  Voted "do pass" by the Special Committee on
Tax Reform by a vote of 7 to 2.

This bill establishes the Fair Tax Act of 2007 which requires the
Department of Revenue to develop by January 1, 2008, methods for
replacing the state individual and corporate income tax and the
estate tax with a fair tax based on all new retail sales and
services.  Upon voter approval, the income tax will be replaced
beginning January 1, 2009, with the department-proposed fair tax.
Tax credits and sales tax exemptions will be phased-out as the
fair tax rate is adjusted to provide continued funding for
programs.  Each sales tax collector and the department will be
allowed to retain .25% of the amount collected.  Each family will
receive a monthly sales tax rebate based on the number of members
in the family and the federal poverty level guidelines to offset
the sales tax on basic necessities.

FISCAL NOTE:  No impact on state funds in FY 2008, FY 2009, and
FY 2010.

PROPONENTS:  Supporters say that with the problems in the
existing tax code and various economic issues the bill authorizes
the Department of Revenue to implement the fair tax.  The fair
tax is not a tax increase or a tax cut.  It just changes the way
Missouri will collect taxes.  Currently, the more productive a
taxpayer is, the more taxes he or she pays.  The bill will
eliminate income taxes for individuals, corporations, and
estates.  The family rebate will assist with basic-need purchases
of taxpayers.  Under the fair tax, the administration costs will
drastically decrease, and the gross domestic product index will
increase 6% to 10% in Missouri.  Everyone will pay the tax, even
those currently working underground or outside the current tax
system.  Prices could actually be lower, and it would encourage
purchases in Missouri and draw purchases from other states.
Businesses will want to invest in Missouri.  Home ownership
should not decrease with the elimination of the interest
deduction since the homeowner will still receive all the benefits
of owning his or her own home.  The sales tax base will be
expanded since all services will be taxed.  There will be no tax
on the sale of used items or sales to businesses.

Testifying for the bill were Representatives Emery and Robb; and
John Putnam, Ray Walker, and William E. Plaster, FairTax.org.

OPPONENTS:  Those who oppose the bill say that eliminating the
income tax and broadening the sales tax base from $60 billion to
a new level with services taxed to $120 billion will shift the
tax burden from high income taxpayers to middle income taxpayers.
The impact on Internet sales and border transactions has not been
determined.  The sales tax will need to increase an estimated 7%
to 9%.  There is no need to eliminate the estate tax.  A sales
tax is the most regressive form of tax while an income tax is the
only fair way to tax.  The average sales tax for a family of four
is approximately $2,100 per year.

Testifying against the bill were Missouri National Education
Association; Otto Fajen, School Administrators' Coalition; and
Missourians for Tax Justice.

Missouri House of Representatives
94th General Assembly, 1st Regular Session
Last Updated July 25, 2007 at 11:21 am