Normally I’d be enthused about a tax simplification scheme, but a proposal being heard in the Missouri Senate this week is simply stupid. SJR 29 would seek to replace all corporate and individual income taxes with a state sales tax on all products and services sold in Missouri. The tax would apply not only to traditional retail items, but to services like private and parochial school tuition, apartment rentals and the purchase of new homes.
The Missouri bill is modeled on a national proposal called the “Fair Tax” which has more merit if applied on a national scale. But since Missouri is the most bordered state in the union, the effect of a Missouri-only Fair Tax would lead to a massive exodus of retail spending from the state, and in places like Kansas City, a massive exodus of citizens.
Beyond these depressive effects, there is a central injustice in the proposal – charging parents who sacrifice to send their children to private or parochial schools a sales tax on the tuition they pay. The tax is initially pegged at 5.11 percent, but could go significantly higher if it does not achieve the revenue collected under the current system.
Parents who send their children to private and parochial schools are a tremendous benefit to state coffers. Even while they pay the property taxes to send the children of others to public school, they themselves do not take advantage of those schools.
Depending on the school district, every child that does not take advantage of public school education saves the state between $9,000 and $15,000 per year. Children enrolled in schools of the Diocese of Kansas City – St. Joseph saved public school districts at least $138 million last year. And each of those parents are paying the same amount for public school education through property taxes as are parents who actually use the public schools. Why would the state then penalize people who are already paying for a service they do not take advantage of? It is fundamentally not fair.
And it’s not smart either. Kansas City has seen a steady drain on its population for the last 30 years with over 100,000 residents fleeing the city. No small part of that exodus has been related to the perceived quality of Kansas City public schools. Young parents deciding where to live in the Kansas City metro certainly consider school options and many choose to simply move across State Line Road to Johnson County, Kansas where they can take advantage of one of the nation’s top performing public school districts.
I live in the Brookside neighborhood of Kansas City – literally two blocks from Kansas. A huge percentage of the middle class tax base of Kansas City is similarly situated near the border with Kansas. There is no bridge to cross. The streets are on the same grid on both sides of the border. The population density is the same. The only thing to alert a traveler to the fact he’s crossed into Kansas is the relative absence of pot holes and the proliferation of speed traps.
One of Kansas City’s saving graces staunching the bleed of citizens into Kansas is the presence of several excellent Catholic and private schools. If retail prices are going to be higher on the Missouri side and school tuition is to be taxed, there is nothing but a pig-headed Missouri pride to keep people from shopping, or indeed living, a few blocks west in Kansas.
Proponents of the Fair Tax claim that the elimination of all other forms of income tax and tax pass-throughs, as well as a sales tax rebate up to the federal poverty level makes the Fair Tax transparent, efficient, progressive and ultimately good for the economy, incomes and tax revenues. I’ve read those arguments. I actually find them persuasive enough to consider seriously. But those arguments were developed for a proposal at the federal level. They are null and void where the Fair Tax is applied in a single state bordered by eight other states and while federal taxes and pass-throughs remain unchanged. It has all the negatives and none of the positives.
And no Fair Tax system should ever incorporate the grave injustice and insult of taxing people more NOT to use public schools.
SJR 29 has already passed a Senate committee and will be debated by the full Senate as early as today. Please contact you State Senator today and let him or her know that you oppose the unfair tax on Catholic School tuition. If you know your Zip plus 4, find your Senator using this form. If you do not know your Zip plus 4 use this form at the post office to find it and then return to the Senate site to find your Senator.