A Missouri House committee heard opening arguments on Wednesday on legislation that would lay the groundwork for eliminating the state income tax.
One of the two resolutions is sponsored by House Speaker Jon Patterson, R-Lee's Summit, who said the state's tax system needs to be modernized.
"What this sets out to do is, number one, give people, our citizens, our neighbors, the choice to go to the polls and say we want to look and see if we can do things differently, to have a system that really reflects the times that we live in," Patterson said.
Modernization, according to Patterson, could include taxing digital products.
The proposed constitutional amendment authorizes the state legislature to expand local and state sales and use taxes to eliminate the state income tax.
Patterson said if Missourians were to pass the proposed constitutional amendment, future legislatures would then begin working on changing tax policy.
"This is the first step in a long, methodical process that will take place if the citizens so choose to modernize our tax system and give people fairness in the tax system that we have," Patterson said.
The amendment provides that if the appropriate revenue triggers to reduce and eliminate the income tax are met, and the top individual income tax rate is reduced below 1.4%, then no state individual income tax will be imposed beginning on January 1, 2031.
While Republicans on the committee expressed support for the resolution, there were questions over some of the specifics.
Rep. Brian Seitz, R-Branson, asked what triggers would be included that would allow for the elimination of the income tax.
Patterson repeatedly said the heavy lifting of policy changes would be for future legislatures, not the current one.
"I have no doubt that you'll be part of that discussion and say, 'What kind of triggers do we need that are safe, responsible, that will keep Missouri functioning and the government running, and that we can cut the income tax at the same time,'" Patterson said.
Rep. Jamie Gragg, R-Ozark, had questions over how this would affect Missouri's seniors, especially those who do not pay income taxes anymore because of retirement.
"People retire, people go to the Ozarks. We've got them coming down in droves. That's why we've got major healthcare growth down there. Tell me about seniors," Gragg said.
Patterson said seniors would benefit on multiple fronts, including not paying income taxes.
"For one thing, many senior citizens work. They work well into their 70s, so they'll have an income tax cut," Patterson said.
Meanwhile, Democrats had greater skepticism for the measure, beyond the prior stated concern that eliminating the income tax would create a roughly $9 billion hole in the state budget if that funding is not made up in another way.
Rep. Pattie Mansur, D-Kansas City, said in her conversations with constituents, the income tax has not been brought up.
"I think most people in my district understand that income tax is sort of the fee you pay in order to have good roads and support your schools and that there's public health and clean water and those kinds of things," Mansur said.
House Minority Leader Ashley Aune, D-Kansas City, asked Patterson why the legislature was focusing on income taxes, when property taxes appear to her a more pressing issue. Patterson assembled a special committee last year examining the state's property tax system.
"I've never heard anyone tell me their state income tax is too high. So, I'm curious, how did we get here, from all the work we've been putting into property tax reform, to abandon that idea in your last session here, to focus and carry the bill yourself on cutting our income taxes?" Aune asked.
Patterson said the legislature will also be able to work on property tax bills this session.
The resolutions drew testimony from people and organizations both for and against them. Aaron Hedlund with the White House Council of Economic Advisers backed the plan.
"The most regressive thing you can do is not have job opportunities for people and there are better job opportunities, more wage growth, more investment in states that don't have an income tax, that don't penalize people's paychecks and penalize production," Hedlund said.
However, Jeremy LaFaver with the nonpartisan Missouri Budget Project said Missouri already taxes a larger percentage of low-income people in the state and expanding the state sales tax would make that situation worse.
"You raise taxes on most people, you cut funding for services in your state budget, and you restrict consumer spending that makes it harder for your state, our state, to grow economically," LaFaver said.
Another group that is against the resolution is AARP.
"This is a huge tax shift onto older people in the state of Missouri, and if you rely on a public pension or Social Security for the majority of your income, you are going to see a massive, massive tax increase, and it's going to be in everyday costs," said Jay Hardenbrook with AARP Missouri.
Rep. Steve Butz, D-St. Louis, said he believed this measure could have an uphill battle when it comes to voter approval.
"I know the AARP members, they come out in force, they vote, which is one reason I think this is going to have a tough time at the ballot," Butz said.
The resolutions are HJR 173 and 174
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