Missouri Considers Replacing Property Taxes with Higher Income Taxes for Schools -- Rural Policy Matters, Volume 5, Number 10 (October 2003)

Missouri legislators are working on a plan proposed by a university economist to institute a "flat" income tax of 6.75 percent that might generate enough revenue ($2.8 billion) to increase funding for schools and eliminate local property taxes for many school districts. According to the plan, proposed by University of Missouri economist Ed Robb, the increased revenues generated by the flat tax would enable the state to fund education at the rate of $4,750 per child after three years.

The plan comes at a time when legislative leaders are projecting as much as $1 billion in deficits for next year. Gov. Bob Holden had proposed raising $44 million this year and $80 million next year by closing several tax loopholes, but the legislature rejected the plan.

At the same time, a coalition of 191 Missouri school districts is preparing a lawsuit against the state over the state aid formula. The Missouri Education Coalition for Adequacy recently completed a costing out study that estimates an "adequate education" would cost approximately $5,428 in base spending per child, and that figure should increase each year to account for inflation. In addition, the group argues, supplemental funds would be necessary for poorer school districts that have fewer resources to provide "equitable" educational opportunities.

Opponents of the flat tax plan argue that low income taxpayers shouldn't have to pay the same proportion of their income in taxes as wealthy taxpayers, and that income taxes should be based on ability to pay. Moreover, the plan addresses the issue of how much money goes to education; it does not deal with the equitable distribution of that money. Other controversial details of the plan call for the complete elimination of the corporate income tax so that the state would be more attractive to businesses.