The Missouri Senate has moved a step closer to Kansas-style tax changes. Before proceeding, legislators must gain a more complete picture of exactly what they’re stepping into.
With a preliminary vote, senators Wednesday night voiced support for a bill that over a five-year period would reduce income tax rates by three-quarters of a percentage point. It would gradually increase the state sales tax by a half cent over that period.
Missouri lawmakers correctly want to keep the state economically competitive with Kansas, which has rocked its neighbors with draconian income tax cuts. The Missouri Senate already has passed a long-overdue bill overhauling the state’s archaic tax credit program, and lawmakers in both chambers are looking at a package of economic incentives that should appeal to businesses. Those are good moves.
But Missouri already has one of the nation’s lowest overall tax structures. Schools, universities, highways and vital state services currently struggle for lack of revenue.
Kansas Gov. Sam Brownback and the Legislature have placed that state in a precarious position by cutting taxes too deeply. Missouri would better compete by improving schools, roads and public health, not forcing them to absorb further cuts.
Senate Bill 26, sponsored by Republican Sen. Will Kraus of Lee’s Summit, is complex legislation. It raises crucial questions:
- Exactly what would the fiscal impact be?
Kraus estimates that loss of income tax revenues, offset by an increase in sales taxes, would result in a net loss of revenues of $450 million a year once the changes are fully phased in. A spokesman for Kraus’ office claimed that amount should be covered by normal growth in the state’s economy.
But the Missouri Budget Project, a nonprofit group that argues the state is already underfunded, calculated that the effect of the changes would be a net loss of $950 million a year beginning in 2018, and could cost the state as much as $300 million in the upcoming year’s budget.
Obviously, lawmakers need a definitive number from the state’s budget experts before moving forward.
- Who would bear the brunt of the changes?
The Senate bill provides for a deduction for tax filers with adjusted gross incomes of less than $20,000. Still, the sales tax increase would be most punitive for low-income Missouri residents. Combined with a proposal by Gov. Jay Nixon to eliminate a tax credit for low-income renters, the Senate’s changes would unfairly harm impoverished Missourians and senior citizens.
- How else would a sales tax increase affect the state?
A significant contingent of lawmakers is moving ahead with plans to ask voters for a one-cent sales tax increase to upgrade the state’s highways.
It makes little sense for the General Assembly to compete against itself in proposing tax increases. Also, many cities in the Kansas City area are close to a sales tax tipping point.
Senate Bill 26 is pallid in comparison to Kansas’ tax cuts. But Missouri invests so little in citizens and services now that any further giveaway is a serious matter. Lawmakers shouldn’t do so based on the unproven claim that lower income taxes will pay for themselves in added jobs.
Copyright The Kansas City Star. Reprinted with permission.