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Legislator proposes new income tax system for Missouri

December 03, 2002
By: Amy Menefee
State Capital Bureau

JEFFERSON CITY - One Missouri legislator wants to do away with state income tax as we know it.

Incoming Senate majority leader Mike Gibbons, R-St. Louis County, has filed a bill that would replace the progressive state income tax system with a single-rate tax.

Missouri, like 44 other states, has a system that taxes income at a progressively higher rate -- the greater the income, the larger the percentage of that income is paid in taxes.

Gibbons said Missouri's system is outdated, complex and unfair, especially to families. His proposal would give families a deduction of $20,000 on a combined tax return and $10,000 for an individual, while eliminating other deductions. Gibbons said this would simplify the filing process.

The proposal includes a flat rate of 4 percent on all individual income. Gibbons said this will be fair and will not allow for the state to use the tax code for other purposes.

"The tax system exists only to fund the essential functions of government," Gibbons said. "It shouldn't be used to redistribute wealth or create incentives for behavior."

The bill may undergo changes once it reaches committee, but Gibbons said he was filing the bill early in hopes of getting it rolling. Gibbons' new position as Senate majority leader will allow him to dictate when and if bills are brought up for debate.

Sen. Wayne Goode, D-St. Louis County, said going to a single-rate tax would not make that much difference in Missouri's tax structure.

"I think raising exemptions and doing away with deductions and credits is a good idea," Goode said. "Doing that would favor low-income people."

Goode also said he would like to see revenue gain from the tax.

"The bill as written would raise additional revenue," Goode said. "We certainly need more general revenue to get through the foreseeable future."

The tax-rate change proposed in the bill would raise more than $200 million in revenue, which would require a vote of the people. But Gibbons said he wants to hold revenue steady and is open to adjusting the percentage rate in the bill in order to do that.

"My intent is not to increase state revenue," Gibbons said, "but I'm not interested in reducing state funds, either."

Robert McIntyre, director of the Washington-based Citizens for Tax Justice, said proposals for such "flat" taxes don't make sense.

"It sounds like he's got something that would be popular with 2 to 3 percent of the population," McIntyre said of Gibbons' proposal. "He must have some inclination that the higher-income people are overtaxed."

But Bill Beach, director of The Heritage Foundation's Center for Data Analysis, said McIntyre is wrong.

"Contrary to what people might think, a single-rate tax actually shifts the tax burden upwards," said Beach, who worked in the Missouri budget office when John Ashcroft was governor. "The critics don't realize that."

Beach said it makes sense to go to a single-rate evaluation.

"As incomes have gone up, more and more people are paying the top marginal tax rate," Beach said.