advertisement

WHAT OTHERS SAY: Missouri can't afford to leave $400 million on the table

Monday, April 23, 2012 | 10:21 a.m. CDT

Forty-four of the 50 states in the nation don't allow it. Missouri does, and in 2011, the practice denied state agencies nearly $400 million that Missourians desperately needed for health care, education, infrastructure and other essential services in every part of the state.

Only Missouri, Alabama, Louisiana, Iowa, Montana and Oregon treat federal income tax as a deductible expense for state income tax purposes, according to a report by the Institute on Taxation and Economic Policy, a 32-year-old non-partisan research and analysis organization based in Washington, D.C. It is a costly tax code luxury that produces no noticeable public benefit and is ripe for reexamination by the Missouri legislature.

The state continues to struggle with the after-effects of the Great Recession of 2007-08, which already has forced deep cuts in crucial state services all over the country. Missouri's 2012-13 fiscal year, which starts July 1, probably will be worse because special federal funds that eased financial pressures on health care and education services for the last two years have run out.

Missouri's budget is projected to fall short of the current year's level by $500 million (according to the governor's office) to $800 million (according to the Missouri Budget Project). Recovering $400 million would spare Missouri's 6 million residents a lot of hardship.

Yet Missouri's Republican-dominated House seems so intent on embarrassing itself with meaningless protest votes on federal health care legislation and slipping millions of dollars of favors into bills for pals and contributors that it can't be bothered with exploring the possibility of helping constituents with an additional $400 million.

Rep. Jeanette Mott Oxford, D-St. Louis, and 30 co-sponsors (all Democrats) introduced legislation to eliminate the deductibility of federal income taxes. It was referred to a legislative committee, but no hearings were scheduled.

Last week on the House floor, Oxford tried to attach her bill, HB 1617, as an amendment to three other bills under consideration, which at least would keep it alive. Her colleagues refused. She told us that she intends to keep trying.

Even if it passed the House, Oxford's legislation still would have to get through the state Senate and be signed by Gov. Jay Nixon to become law. Then it would have to be submitted to the voters for approval under Missouri's Hancock Amendment because eliminating the deduction would leave more income subject to state taxation and increase revenue — which, of course, is the reason for doing it.

GOP legislators would argue that HB 1617 would result in a tax increase. And a party that won't increase the nation's lowest state tax on cigarettes (to the detriment of individuals' health and the state's Medicaid budget) or collect taxes on online sales by out-of-state businesses (to the detriment of Missouri retailers) is not going to mess with any kind of tax increase whatsoever.

Oxford knows that better than most people. But her idea is worth a hearing. Forty-four other states, including some every bit as conservative as Missouri, have found it to be a good idea. Sooner or later Missouri will, too. But there will be a lot of needless suffering until that day comes.

Copyright St. Louis Post-Dispatch. Reprinted with permission.


Like what you see here? Become a member.


Show Me the Errors (What's this?)

Report corrections or additions here. Leave comments below here.

You must be logged in to participate in the Show Me the Errors contest.


Comments

Jimmy Bearfield April 23, 2012 | 11:58 a.m.

"It is a costly tax code luxury that produces no noticeable public benefit"

Only if you believe that the government is the best steward of your money. If so, you can always pay more than just what you owe in taxes.

When taxes increase, I cut back on my work. If I don't make it, the government can't take it.

(Report Comment)
Ken Geringer April 23, 2012 | 5:53 p.m.

JB, what goof you are.

(Report Comment)
Derrick Fogle April 23, 2012 | 6:07 p.m.

That $400M would be additional taxes collected from Missouri residents. "Recovering" that money by raising income tax payments is NOT going to "...spare Missouri's 6 million residents a lot of hardship." In fact it will INCREASE the hardship of taxpaying Missourians to the tune of ~$100 per year, each.

Where did that wording come from? It's not attributed to any source. Did one of the democratic legislators actually say that, or is the reporter just trying to make them look bad by seemingly putting those words in their mouth? Either way, the statement is outrageous. Considering how many unattributed political jabs at both sides are taken in this article, I think it's more likely the reporter is just trying to stir the pot.

If the money is going to help specific people and programs, fine; talk about those specific benefits to those specific people. I'm not against making a sacrifice and pay more taxes to help others who are in need, or perhaps help pay for infrastructure repairs and improvements that are going to help everyone. I agree that the tax computation is needlessly complex because of this deduction, and simplification would be good.

But a blanket statement saying that raising people's income taxes is going to benefit them is pure and utter bovine feces.

If you want to pass the bill to simplify the tax code, just make it revenue neutral. That would get a lot of support. But raising aggregate state income taxes by $400M is going to hurt way more Missourians that it would help.

(Report Comment)
Michael Williams April 23, 2012 | 6:54 p.m.

Derrick: Often, these "What Others Say" columns are unattributed. They are usually copyrighted. It is impossible to tell if they are written as letters to their editor, written by reporters, written by editors...or....whom?

Personally, I think the Missourian should print such information. For a newspaper that requires name identification from its contributors, I'd think they would do the same here.

Odd.

(Report Comment)
Kevin Petersen April 23, 2012 | 7:25 p.m.

Many of the "What Others Say" are written by the editorial boards of the papers, so the paper name is the correct attribution. For instance... http://www.stltoday.com/news/opinion/col...

(Report Comment)
Michael Williams April 23, 2012 | 9:10 p.m.

Thanks for the clarification, Kevin.

Do editors generally collaborate on editorials....as in someone writes the original and others chime in? Or is it usually an individual effort?

(Report Comment)
Jimmy Bearfield April 24, 2012 | 10:11 a.m.

@Ken: When taxes increase, I cut back on my work. Then something else happens: People such as you have to work more to make up for the tax revenue shortfall. Guess what else? Neither you or the government can make me work more than I want to.

(Report Comment)
mike mentor April 24, 2012 | 10:50 a.m.

If it's run in the Post, I would look to Media Matters as a possible contributor...

(Report Comment)
Mark Foecking April 24, 2012 | 12:23 p.m.

Jimmy Bearfield wrote:

"When taxes increase, I cut back on my work. Then something else happens: People such as you have to work more to make up for the tax revenue shortfall. Guess what else? Neither you or the government can make me work more than I want to."

I understand the sentiment, but that's not in your best interest if you want to maximize your income.

Say you make $100,000 and are taxed at 15% on that income. You send the goverment $15,000 and keep $85,000. If they raise your taxes to 20%, that means you would now pay $5,000 more, and you keep $5,000 less.

So, if you wanted to keep your tax outlay at $15,000, you could cut back your work until you will owe $15,000 in taxes at the new rate of 20%. That's $15,000/0.2 or $75,000 in income, or $60,000 after taxes. So in keeping your tax amount constant, to avoid paying an extra $5,000, you've gone from an after tax income of $80,000 to $60,000, losing $20,000 in after tax income. It would be more rational to either work the same amount and take the $5,000 drop in after tax income, or increase your work to where you make $106,250, for the same after tax income at the new rate of 20% (or look for deductions).

It should also be pointed out that reducing your income to keep your tax amount constant doesn't make anyone need to pay more taxes.

If we multiply all these numbers by 100,000, to put it more in the range of a publicly traded corporation, the shareholders would not be pleased with losing that kind of revenue.

So, yes, no one can make you work any more than you have to. But the rational response to higher taxes is not necessarily working less.

DK

(Report Comment)
Mark Foecking April 24, 2012 | 12:45 p.m.

Sorry, it's actually going from $85,000 in income to $60,000. Oops.

DK

(Report Comment)
Jimmy Bearfield April 24, 2012 | 1:41 p.m.

"It should also be pointed out that reducing your income to keep your tax amount constant doesn't make anyone need to pay more taxes."

Sure, it does. Unless a government -- state, fed, county or city -- is willing to run deficits or cut programs, it must increase taxes when revenue falls short of predictions.

As for working less, besides allowing me to keep more of what I earn, I also will qualify for more tax breaks. It's sill for me to continue to work hard when I can coast from now on.

(Report Comment)
Michael Williams April 24, 2012 | 2:23 p.m.

MarkF: "I understand the sentiment, but that's not in your best interest if you want to maximize your income."
_____________________

All that you wrote is true....

However, it assumes the motive is maximizing income from the working job.

Which, in Jimmy's case (and mine), the motive is incorrect.

(Report Comment)

Leave a comment

Speak up and join the conversation! Make sure to follow the guidelines outlined below and register with our site. You must be logged in to comment. (Our full comment policy is here.)

  • Don't use obscene, profane or vulgar language.
  • Don't use language that makes personal attacks on fellow commenters or discriminates based on race, religion, gender or ethnicity.
  • Use your real first and last name when registering on the website. It will be published with every comment. (Read why we ask for that here.)
  • Don’t solicit or promote businesses.

We are not able to monitor every comment that comes through. If you see something objectionable, please click the "Report comment" link.

You must be logged in to comment.

Forget your password?

Don't have an account? Register here.

advertisements