Abolishing the state income tax and allowing Missouri to go into debt were two budget fixes proposed to a Senate panel Jan 12.

Five witnesses testified on the benefits and complications of eliminating Missouri’s income tax, currently the state’s largest source of revenue. Lost revenue would be made up by increasing the state 4.2 percent sales tax.

Joseph Haslag, executive vice president of the Show-Me Institute, a conservative think-tank, said Missouri is falling economically behind states that do not have an income tax.

Amy Blouin, director of the Missouri Budget Project, a liberal group that advocates for lower income Missourian, said the bill that would eliminate the income tax places sales tax on services other states do not.

Show-Me’s estimate of raising the tax to 5.11 percent may not be enough to offset income tax losses, Haslag said, adding that Missouri could consider taking on debt until a correct rate is determined.

Former state Budget Director Jim Moody, now a lobbyist for various businesses and health interests, said the proposed 5.11 rate would leave the state about $1.3 billion short. Health care services would have sales taxes levied on them under the proposed bill.

In closing remarks, Sen. President Pro Tem Charlie Shields, R-St. Joseph, said that Missouri's current budget situation requires legislators to look at solutions they had not previously considered.