BACKGROUND - Food Tax Proposal
In 1997, the state acted to exempt food purchases from the state's three cents general sales tax. By this action, the state recognized that taxing food is WRONG.
It's past time for the NEXT STEP: Exempting food from LOCAL sales tax.
Because local governments have become so dependent on sales tax to pay for local services, the state must act to replace the revenue lost when food is exempt from local sales tax. It is the responsible way for the state to proceed on this issue.
Exempting food from local sales tax will make our tax system more fair --- IF the state also acts to adopt a FAIR way to replace the lost revenue.
Everyone must have food to survive. Food is an absolute necessity for life. Most states do not allow food purchases to be taxed. This decision is based on the principle that it is wrong to tax food.
Missouri is one of only 17 states that still allows a sales tax on food. Eliminating the local sales tax on food will benefit everyone --- but since families and individuals on the lower end of the economic scale must spend more of their money for necessities, they will benefit the most from the food tax exemption.
The amount you will save if food purchases are exempt from local sales tax depends on the sales tax rate of the city and county where you shop, and the amount spent for food.
In the most heavily populated areas of the state, local sales taxes are at least 3%, or only slightly less. But in many cities, local sales taxes are much more --- 4%, and 3 3/4%.
These are some examples of LOCAL sales tax rates in effect January 1, 2003:
- In the city of Franklin and in New Franklin, the total LOCAL sales tax on food is 4 cents per dollar (2 cents -- city; 2 cents -- Howard county)
- In Warrenton, city sales tax is 1 3/4 cents; Warren county sales tax is 1.9 cents. The total local sales tax on food is 3.65 cents per dollar.
- In Charleston, city sales tax is 1 1/2 cents per dollar; the Mississippi county sales tax is 1 3/4 cents per dollar, for a total of 3 1/4 cents.
- In St. Louis county, the highest city sales tax rate is 1 1/4 cents per dollar in Brentwood, Clayton, Crestwood, Des Peres, Edmundson, Glendale, Kirkwood, Manchester, Maplewood, Richmond Heights, Rock Hill, Shrewsbury, and Town and Country. When combined with the 1.85 cents per dollar sales tax imposed by St. Louis county, food buyers pay 3.1 cents per dollar in local food tax.
- In Kansas City (Jackson County), the total local sales tax on food is 2 3/4 cents per dollar.
- In the City of St. Louis, the local sales tax is 3.391% -- the highest in the St. Louis area. The total local food tax is the same - 3.391 cents per dollar.
From the current trend, we can expect local sales tax rates in cities and counties to continue to increase, thus making the sales tax on food, a basic necessity for everyone, even higher.
A FAIR Way to Replace the Lost Revenue
to Local GovernmentsThe use of the federal income tax deduction on state income tax to generate the money to replace dollars that would be lost by the food tax exemption has advantages for all income groups -- from the lowest income to the wealthiest.
It would make our tax system more fair. We would end an inequitable sales tax on food, and replace the revenue from this tax through the state individual income tax. Reducing the federal income tax deduction also makes our state income tax more progressive, since it primarily benefits high-income taxpayers.
A NET TAX SAVINGS FOR EVERY TAXPAYER IS EXPECTED.
Reducing the federal income tax deduction for the replacement funds benefits wealthy taxpayers. The highest income taxpayers will have a small increase in state individual income tax, but this means they will also get a larger deduction on their federal income tax. This would not occur if any other tax were used to generate replacement revenue for local governments.
It is expected that taxpayers in every income category will have a NET TAX SAVINGS with this proposal. This is due to the interaction of the federal and state income tax systems.