Sales tax-concepts hurt the middle-class and poor the most. Unless you exclude food and clothing (as Massachusetts did in the 1970’s), they will pay a disproportionate cost because food and clothing take a greater percentage out of their disposal income.
I suggest you read up on the Fair Tax Act(HR25/S296)before making a blanket statement. You would have realized people will receive a rebate at the beginning of each month for the tax on necessities(food, shelter, clothing, medical care) up to the poverty level. The middle class and poor will benefit the most since effective tax rate(after the prebate is factored) will be lowest in comparison to their salaries. The Missouri Sales tax proposal also includes a prebate. Additionally lower income people tend to buy used big ticket items. The Fair Tax will not tax used items thereby benefiting lower income earners the most.
The rich don’t need to buy things.
Oh really? They don't buy food, clothing and shelter? The prebate for high income earners will be a very small percentage compared to their wages. Consequently the effective tax rate will be nearly the full amount. High income earners tend to spend more money on luxury items not covered by the prebate.
Furthermore, 75-80% of Missourians live within 20 minutes of another state. So if I planned to buy a product, I would seriously consider buying it in Kansas and avoid the MO sales tax. Same with a house.
You may want to reconsider. Missouri's reason for this legislation is due to the state losing revenue to surrounding states because Missouri's overall tax burden is greater. The Missouri Fair Tax legislation will replace individual and corporate income taxes with a flat rate sales tax of 5.11%
Why build a house if it is inflated by sales taxes paid on materials? Young people who want to buy cars and houses will have to delay or completely forget acquiring things.
Used homes will not be taxed. New home prices won't be inflated because there will be no business to business tax that can be passed onto the consumer. People will have more money in their paychecks to purchase big ticket items with the elimination of income taxes. All the embedded corporate income taxes in products purchased under the income tax will be removed thereby lowering the cost.
Any major change in taxation would influence consumption and, ultimately, employment.
You are correct! People will spend more with more money in their paychecks! More consumption will grow businesses and increase employment!
If anything, sales taxes should be lowered or eliminated, not become the backbone of an entire taxation system.
The current sales tax, along with the state income tax will be replaced with a single sales tax. This will lower the overall tax burden.
You can read the summary of MO-HJR25 at the following website:
Summary of the Introduced Bill
The text of the bill is very misleading about what will really happen when the implementation occurs. The additional 1% added over current taxes will not be revenue neutral. In fact, they really can't give a solid number of what the actual tax rate will be or quickly become. The idea of making merchants and workmen tax collectors is an undue burden and a disincentive to starting a business. The logistics of prebates, rebates, etc. creates more bureaucracy. Furthermore, poverty is fluid. Categorization of need could change monthly, adding more complexity to an already drained social welfare system. Adding prebates and rebates to food stamps and Medicaid and school lunches just adds another layer to the welfare state.
Balancing the Missouri budget is a moving target because of our current recession, unemployment, and state entitlement mandates. There is no way that Jeff City can balance the current budget given the unknowns muchless know the numbers needed to change the system. Revenue neutrality can only be guessed.
Rich people do not necessarily buy luxury items. The millionaire-next-door is more likely to be the guy next to you in Wal-Mart than the hot-shot in the leased sportscar. Rich people figure out ways to get around taxes. Furthermore, tax policies influence spending patterns, which is why sales-tax holidays are so popular. I know several small shopkeepers whose biggest days of the year are the sales-tax holidays. Missouri recently rejected an additional tax on cigarettes. I know a fellow with a quick stop near the IL border whose business would have dried up had our taxes on cigarettes become higher than IL's. Furthermore, that guy from the next state buying cigs usually buys gas and food while he's here.
Comparing MO's tax burden to other states, particularly Tennessee, is deceptive. TN is a right-to-work state. We also have state liabilities that other states don't have because of our loss of the lead mining business (making Emerson's district the 14th poorest in the country), as well as loss of corporate headquarters in St. Louis and closures of auto plants.
Construction will be seriously effected. Of course new construction will be taxed. Lumber will be taxed. New refrigerators will be taxed. We will become like European countries that have 20% vat taxes. Lucky tourists get the money back when they leave the country but the locals have to pay it. This is a step to the European-ization of the US.