In a blog column today former Missouri Rep. and Speaker pro tem Carl Bearden of United for Missouri makes a pitch for replacing Missouri’s income tax with a sales tax, which has long been a goal of Rex Sinquefield and others and may come to the ballot next year.
The argument Bearden makes is fine, but it includes a rather curious statement in suggesting the poor wouldn’t suffer if the tax burden is shifted from income to sales: “It’s a common misconception,” Bearden writes, “that the poor pay more of their income on essentials.”
The statement is curious because it’s true but misleading. The conception, as it relates to tax policy, isn’t that the rich and poor pay the same amount on essentials like food and medicine — they do. It’s that the percentage of income spent on essentials goes up as income goes down; that is, the poor pay more for food and medicine relative to income, not as an absolute number.
The impact of that fact on tax policy can be lessened, as Bearden points out, by not taxing those essentials — that’s what is called “progressive” tax policy, because it raises the relative tax burden as income grows. And as Bearden points out essentials like food are exempt from some, but not all sales taxes in Missouri.
Food, for example, escapes most state sales taxes in Missouri. But local sales taxes are still collected, and in some cases they can be higher than the state levy.
As a result, figures show state and local taxes in Missouri are regressive — that is they hurt the poor, again relative to income, not in absolute figures.
In Kansas City, Mo., in 2007, the total state and local tax burden (sales, income, property, etc.) for a family of three with $25,000 in income was $3,464 — 13.9% of income. That same family earning $150,000 paid $14,594 in taxes — much more in absolute terms, but a little less than 10% of income (figures from the U.S. Census.)
Put another way, if the tax burden were flat — say, exactly 10% of income — the burden for the higher earner would be $15,000, roughly what it is now, but the burden for the poorer family would be $2,500, a savings of more than $900 a year.
Bearden’s case — and that of most flat-tax advocates — is that everyone should pay roughly the same amount for government; that is, there is no reason one person should pay $15,000 and another $2,500 for the same government services. That’s an important discussion and one Missouri may soon have.
But replacing the income tax with the sales tax would almost certainly make Missouri’s taxes more regressive — again, hurting the poor relative to income, not in absolute terms.
And one more thing.
The total estimated state tax burden in Missouri in 2005 was $1,645.49 per person, the fifth lowest in the nation. Tennessee, the model Bearden uses in his column because it has no income taxes, actually had a higher per-person state tax burden than Missouri — $1,678.23 (figures again from the Census Bureau.)