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Nov. 9 — Missouri voters approved a constitutional ban on new sales and use taxes on services, a proposal that had drawn fire from both ends of the political spectrum, but which passed 57 percent to 43 percent.
Constitutional Amendment 4, passed Nov. 8, prohibits new sales or use taxes on any service or transaction not subject to the tax before 2015. The measure doesn’t prohibit increases in the sales tax rate on services or transactions currently taxed.
Supporters of the measure argued it was needed because lawmakers in the state capital and in surrounding states have been looking hungrily at the relatively untaxed service sector as a potential source of revenue. But opponents said the amendment would restrict lawmakers’ flexibility in dealing with future budget shortfalls and limit the state’s ability to enact comprehensive tax revisions and provide needed services.
In a statement, Scott Charton, spokesman for the Missourians for Fair Taxation group set up by the Missouri Realtors Association to back the amendment, said, “The time was right to make a stand. This is a victory for Missouri’s hard-working taxpayers and their families. Passage of Missouri’s Amendment 4 is a first-in-the-nation, pre-emptive strike against new sales taxes on everyday services. The threat of a new sales tax on services has been stopped, thanks to the bipartisan support of common-sense Missourians.”
Richard Sheets, deputy director of the Missouri Municipal League, told Bloomberg BNA Nov. 9 that the league was disappointed in the vote and concerned about the possible impact of the amendment on important local services.
“City officials are worried about our ability to provide fire and police services, street maintenance, local park services,” he said. “Our economy is shifting to a more and more service economy, and the revenue for local government services many need to come from that sector.”
Sheets also noted that the amendment bans new sales and use taxes on both services and transactions not taxed before 2015. He said the league is concerned that the term “transaction” could be construed so as to threaten local governments’ current tax bases.
“The term transaction is not defined in the Missouri Constitution,” he said. “And with the changes in the economy and the changes in the way we access products, we’re suddenly very vulnerable to how judges interpret that term in order to keep taxing what we’ve been taxing.”
Voters also turned back two measures on the ballot to increase the state’s tobacco tax, currently the lowest in the country at 17 cents per pack of cigarettes.
Constitutional Amendment 3, which was defeated 59 percent to 41 percent, would have increased the cigarette tax to 77 cents per pack by 2020. It would have generated between $260 million and $375 million each year to fund early childhood health and education initiatives. Proposition A, which would have increased the cigarette tax to 40 cents per pack by 2021 and generated around $100 million per year for use on transportation projects, was defeated 55 percent to 45 percent.
Voters approved Constitutional Amendment 1, renewing for a 10-year period a statewide sales and use tax of one-tenth of one percent that generates around $90 million per year for soil and water conservation and for state parks and historic sites.
To contact the reporter on this story: Christopher Brown in St. Louis at ChrisBrown@bna.com
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