Stiff Necks and Sore Shoulders: A Statewide Concern
The state is taxing the wrong things. For those of us who are employed, April 17 looms and a nice massage sure could relieve some stress. That is, if we have enough left in our paychecks after a visit from the taxman.
However, if Missouri would eliminate the income tax and instead tax services such as massages, shoe repair, beauty salons, and tuxedo rentals (all of which are exempt from the state sales tax), we can shift the tax burden to those who CHOOSE to use such services and away from people’s paychecks.
While pondering my income tax burden, I started to wonder just how many services are exempt from the state sales tax.
According to the latest data from the Tax Administration, out of 168 services surveyed, Missouri slapped taxes on only 26! Now, being in favor of low taxes myself, on the surface, that does not necessarily seem to be a bad thing. However, considering that all workers in the state are forced to pay income taxes, wouldn’t it be better to eliminate the exemptions for services that a select group of people use? Then the extra revenue generated could be used to lower the personal income tax. Sure, one would have to pay more for a massage, BUT he/she would have more income to pay for it. The tax burden then would shift to only people who use such services.
Would such a broad-based sales tax harm Missouri? Studies show that taxes on consumption have a less negative impact on GDP growth per capita than taxes on personal income, and personal income tax cuts for lower earners would be most effective for economic recovery.
Tennessee has not been harmed because of its reliance on a broad-based sales tax. Tennessee has no personal income tax and taxes 67 services (at a higher rate, too: 7 percent vs. 4.225 percent in Missouri) and yet it has surpassed Missouri in economic and population growth. This tax structure might not be the only reason for Tennessee’s success, but I think it is fair to say that Tennessee’s economic growth has not been hindered due to a heavy reliance on a broad-based sales tax. Considering that Missouri ranks 49th out of 50 states for job creation, broadening the sales tax base and lowering the personal income tax rates (even if it means more costly massages) does not seem like a bad idea.