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WHAT OTHERS SAY: Lowering income taxes to lure or keep business in Missouri won't work

Thursday, March 21, 2013 | 6:00 a.m. CDT; updated 7:23 p.m. CDT, Thursday, March 21, 2013

*An earlier version of this commentary was attributed to the wrong newspaper.

Missouri is racing to keep up with Kansas — but the direction may be down instead.

Senate Bill 26, which would reduce individual and business income taxes while raising some state sales taxes, is an ill-devised plan to get businesses to stay in or come to Missouri, which shares its border with Kansas — a state that has tried the same method with little visible success.

Sponsored by Sen. Will Kraus, R-Lee's Summit, this bill has a good chance of making it through the Senate, where it passed on its third reading Tuesday. If that happens, it is likely to fly through the even more conservative House.

That should not happen. Our local legislators should know how dangerous this bill is and what it could do to the quality of life in economically flourishing southwest Missouri. That, in turn, would hurt business — and citizens.

While tax reform is a worthy effort, SB 26 is not. It will cost the state between $450 million and $700 million a year by the end of the decade, even with income generated through increased sales taxes.

Funds to local governments, schools, human services, even infrastructure will have to be cut to accommodate that deficit, which is exactly what Kansas is facing with projected revenue more than $700 million short of budgeted expenditures after passing a similar law last year.

The goal behind it all is to spur job growth and expand the tax base — a worthy goal, indeed. But there is scant evidence that the move will accomplish that. The Center on Budget and Policy Priorities has studied this concept and concluded that cutting taxes does not help small businesses create jobs but does hurt state economies.

How can this be? A study by the U.S. Small Business Administration in 2012 found that states with high income tax rates created just as many small businesses as other states. In fact, the main draw is the location of other businesses in the same industry.

But, even if a reduced income tax rate did influence a business to locate in Missouri, only 2.7 percent of all personal income taxpayers are genuine small businesses that have any employees, and the number of employees is driven by demand for the company's products or services, not taxes paid.

If we want more businesses and more jobs in southwest Missouri, we need a viable state and local government that is sufficiently supported. We need infrastructure and schools that can produce trained workers as well as consumers.

We don't need a new income tax structure that would cost the state as much as $1 billion. We need an income tax structure that is more equitable and adequately supports the programs and services we need to compete economically and socially.

Copyright Springfield News-Leader. Reprinted with permission.


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Comments

Ellis Smith March 21, 2013 | 11:49 a.m.

First, it seems problematic that anyone would use a state income tax maximum rate as priority number one in deciding where one locates; there are numerous considerations.

Secondly, Kansas hardly tops the nation for degree of present industrialization - particcularly if we rule out just one county (the one in which Wichita is located).

It could be that what Kansas proposes to do makes sense - for Kansas. The real concern here is what makes sense for Missouri.

One reason why this poster is a huge champion of Amendment X in our federal Constitution is that the 50 states ARE NOT ALIKE and should NOT have bulk "cookie cutter" economic solutions imposed upon them by a federal bureaucracy that appears neither to know nor care about those real differences.

(Report Comment)
Jimmy Bearfield March 21, 2013 | 12:10 p.m.

"First, it seems problematic that anyone would use a state income tax maximum rate as priority number one in deciding where one locates."

Not at all. Property and income taxes are why so many people have left states such as NJ, NY, CA and CT for states such as FL, NV and AZ. And it's not just "the rich," either. It's lots of blue collar and white collar folks fed up with paying so much to the government.

(Report Comment)
Ellis Smith March 21, 2013 | 12:31 p.m.

PS (to previous post):

As some of you are aware, one of UM System's four campuses holds an annual Saint Patrick's bash (for the past 105 years). What you may not know is that serious business is discussed - between faculty and alumni - particularly where and by whom graduating seniors are being hired.

I'm pleased that, as usual, ALL graduating seniors from two of the engineering departments already have jobs, some as long ago as last autumn (which is normal), but none of the students received offers from firms having operations in Missouri. That is NOT usual, and there's reason to believe no jobs were available, and not that jobs were available but filled by graduates other than ours.

The situation may be an aberration, but it needs watching - and you can bet it will be watched.

(Report Comment)
Richard Saunders March 21, 2013 | 5:10 p.m.

Given that taxation is theft, it is hardly surprising that the only place businesses (and thus the people who depend upon them for both jobs as well as goods and services) can survive is in the least predatory location.

There always comes a time when the predatory state is faced with the question faced by every other parasite, just how does one survive after killing the host?

What made America great was the lack of a predatory centralized state. What has destroyed it is the lack of a properly restrained predator. Especially when said predator is dressed up as one's protector.

History is filled with examples where any theft of over 10% of the productivity of society will hollow it out and cause it to collapse (or revolt).

As always, government is merely the most organized form of crime, albeit with cheaper suits. Approach them at your own peril.

(Report Comment)

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