(The Center Square) – Missourians’ state income tax might be capped at a slightly higher percentage than the current rate under a plan in the legislature.
House Joint Resolution 125, sponsored by Rep. Phil Christofanelli, R-St. Peters, would give voters the opportunity to amend the Missouri Constitution to prohibit the legislature from setting an income tax exceeding 5.9%. The current rate for the 2022 tax year is 5.3%, according to information provided by the Missouri Department of Revenue in the legislation’s fiscal note.
“There’s a principle in tax policy to have an income tax that is as low as possible and spreads the tax burden across as many fields as we can,” Christofanelli said during a hearing of the House Ways and Means Committee on Wednesday.
The legislation also would prohibit expansion of sales and use taxes on any service or transaction that was not subject to sales, use or similar transaction-based taxes on Jan. 1, 2015, except for subscriptions, licenses for digital products, and online purchases of tangible personal property.
“The goal is to envision what the modern economy looks like,” Christofanelli said. “Much of the economy is moving in the direction of those type of services and products. I think Missouri should be able to create a system that could, in the future, focus on taxing those types of products through sales and ultimately lowering the pressure on our income tax. An income tax is a tax on productivity.”
Rep. Mike McGirl, R-Potosi, mentioned laws in place to safeguard Missourians against higher taxation. He also mentioned the new “Wayfair” tax on online sales as he reviewed the exceptions in the legislation.
“That’s a pretty wide scope,” McGirl said. “You can buy a lot of things online. You can order a car online. Your bill wouldn’t exempt the taxes on a particular piece of property.”
Christofanelli replied the bill doesn’t exempt anything from taxes.
“To be clear, what it does is it exempts certain categories of products and services from the prohibition of taxes that was introduced in the Missouri Constitution,” Christofanelli said. “There were services or transactions not subject to sales tax on that date. We are providing an exception so the legislature in the future could have the option of taxing those types of things in hopes of ultimately lowering our state income tax.”
After clarifying with Christofanelli the legislature can set the income tax rate, Rep. Barbara Phifer, D-St. Louis, asked why it should be added to the Constitution.
“Because I would like for our state to move in a direction towards eliminating our income tax,” Christofanelli said.
“So this is a philosophical issue for you?” Phifer asked.
“I think it’s a policy issue insofar as I believe that we should strive to tax consumption over productivity,” Christofanelli said. “I’ll say it’s not particularly a partisan issue. This bill passed out of the Senate Tax Committee – and somebody else can testify to this – but I believe it was 7-1.”
If the legislation advances, voters would be asked to change Missouri’s Constitution with the amendment during the November general election.