SJR 35 - This constitutional amendment, upon the approval of the voters, eventually repeals the individual income tax and certain state and local sales and use taxes and authorizes the imposition of different sales and use taxes that are capped at certain tax rates.
INCOME AND EARNINGS TAXES
This amendment caps the individual income tax rate at three percent for each tax year between January 1, 2014 and January 1, 2016. After January 1, 2016, the individual income tax is repealed.
Currently, senior citizens and the disabled receive an income tax credit that provides relief from property taxes. Because the income tax will no longer exist after January 1, 2016, the General Assembly is required to pass a law that provides senior citizens and the disabled with a continuation of relief from property taxes.
The General Assembly is prohibited from authorizing any political subdivision to tax individual earnings, except for a city that has a tax on individual earnings before January 1, 2013.
SALES AND USE TAXES
Effective January 1, 2014, state sales and use tax laws and exemptions are repealed, except for taxes on alcohol, aviation fuel, insurance products, tobacco, the conservation sales tax, the soil and parks sales tax, and the motor vehicle fuel tax. Between January 1, 2014 and January 1, 2016, a new state tax on sales and services will be imposed at a rate not to exceed five percent, except the rate of tax on food is prohibited from exceeding four percent. Beginning January 1, 2016, the tax rate on sales and services combined with the conservation sales tax rate, and the soil and parks sales tax rate cannot exceed seven percent and the tax rate on the sale of food combined with the conservation sales tax rate and the soil and parks sales tax rate cannot exceed five and one-half percent. All revenues from the new tax on sales and services are required to go to the state general revenue fund, except that the School District Fund is required to receive at least the average amount of revenue it received in fiscal years 2008 to 2012.
Previously taxed property, sales for resale, certain professional services, real estate sales and commissions, utility sales, certain pharmaceutical sales and medical services, child care services, assisted living services, tuition paid for educational services, employee services, component parts of a product or service, construction, warehousing, computer system, software design, employment, call center, and payroll processing services, sales of financial instruments, sales of insurance, sales of railroad rolling stock, sales of barges, property purchased by carriers engaged in air transportation, gaming sales, government purchases, purchases by charitable organizations, food stamp purchases, and purchases made under the supplemental feeding for women, infants, and children program will be exempt from the new tax and from the conservation sales tax and the soil and parks sales tax. The enactment of any new exemption will require a two-thirds vote by each house of the General Assembly and approval by the Governor.
The conservation sales tax and the soil and parks sales tax, will be recalculated to produce substantially the same amount of revenue for fiscal year 2015 as was received on average annually in fiscal years 2008 to 2012. These rates may be readjusted one time after January 1, 2014 and before January 1, 2016 to produce substantially the same amount of revenue as was received on average annually in fiscal years 2008 to 2012.
Effective January 1, 2014 all local sales taxes and exemptions, except those expressly approved by local voters and in effect on January 1, 2013 will be void. The Department of Revenue is required to calculate a new rate for the counties and other taxing to produce substantially the same amount of revenue as was produced on average in the five years before January 1, 2014.
Beginning January 1, 2016 all combined state and local sales taxes cannot exceed ten percent, unless the rate established by the Department of Revenue to produce the same amount of revenue to the local taxing jurisdiction results in a rate above ten percent, or the voters in the taxing district approve a new tax by fourth-sevenths of the voters at certain elections and two-thirds of the voters at all other elections.
If a person who owns real estate has an increase in their property tax liability by more than a certain percentage, and the person is sixty-five or older, with an income of less than 75,000 dollars, and a home that is appraised at 400,000 dollars or less, the person is entitled to receive a property tax credit. The state is required to reimburse local governments for seventy-five percent of the amount of this credit.