GUEST COMMENTARY: Tax cuts, Medicaid expansion key to Missouri business success

Tuesday, February 18, 2014 | 7:50 p.m. CST

Policymakers in Jefferson City don’t create jobs, but they certainly do legislate the environment in which Missouri jobs are either created or lost.

Over the past decade, two governors and our General Assembly have sought to incentivize individual corporations, such as Boeing Co. and Bombardier Inc., with large financial packages intended to lure jobs from outside Missouri.

While I have supported these efforts (and likely will in the future), it’s time our state emphasized improving Missouri’s overall business climate and de-emphasized our reliance on single-project ventures.

How business friendly is Missouri compared to 49 other states? Not as friendly as you may think.

The conservative Tax Foundation ranks Missouri 16th nationally. The Small Business and Entrepreneurship Council ranks Missouri 21st. CNBC calls Missouri the 26th most business-friendly state. Missouri’s own Ewing Marion Kauffman Foundation ranks its home state 28th, and Forbes magazine says Missouri is the 30th most business-friendly state in the U.S. We can do better.

While Missouri waits for the next Boeing to knock on our door, let’s agree to act now to place Missouri reliably in the top-10 states in America when it comes to business-friendly policies.

The two most impactful steps lawmakers can take today to create a top-10 business climate are these: cut taxes and expand Medicaid.

By trimming Missouri’s top individual tax rate from 6 percent, we effectively cut three separate taxes at once: the personal income tax rate, the capital gains tax rate and Missouri’s tax on dividends and interest. Most national rankings analyze these three tax rates separately, so by cutting Missouri’s 6 percent tax rate we will improve in three categories simultaneously.

Next, Missouri should cut taxes on new businesses, as well as on existing businesses that provide jobs to significant numbers of full-time employees. Because our goal is to reduce burdens on job creators, as opposed to reduce taxes on the wealthy, policymakers should concentrate on cutting taxes for those businesses that meaningfully add to job creation within the borders of our state.

And this legislative session is the time to start. With state revenues estimated to increase between $346 million and $429 million in the 2015 fiscal year, the current legislative session is the right time to both increase Missouri’s commitment to existing priorities, like education, and to cut taxes.

Landing Missouri among the top-10 business-friendly states in America will not be easy, and we may not accomplish the goal in one legislative session. But whether we achieve the goal in one year or over several years, top-10 must be our end.

As lawmakers cut taxes to promote job growth in Missouri, they should simultaneously expand Medicaid. More than any other legislative act, Medicaid expansion would provide an immediate fiscal stimulus to Missouri’s economy.

Under the proposed program, each dollar Missouri dedicates to Medicaid expansion would return 19 dollars in new investment to our state, an annual return of 1,900 percent on our tax dollars.

A 2012 study by the Kaiser Foundation estimated Missouri would create 24,000 new jobs by expanding Medicaid, mostly in the high-paying health care services sector. This job-growth estimate is triple the most optimistic projection provided during the Boeing negotiation and at a fraction of the cost.

Medicaid expansion is not supported by only Democrats. It is supported by many right-leaning groups and prominent Republicans as well, including the Missouri Chamber of Commerce and former Sen. Kit Bond.

Setting aside the significant improvement to Missouri’s health care system that would result, Medicaid expansion would be the single most dramatic economic development advancement in our state in 25 years.

Missouri has great advantages to offer our nation’s businesses: a central location, an outstanding workforce and a low cost-of-living, among them. But because Missouri has no ocean, limited natural resources and unpredictable winters, our state will always face challenges that many of our competitors do not.

Therefore, Missouri must compete aggressively with other states in the area of tax policy in order to bring jobs and opportunity to our citizens. In a mobile/global world, this fact is inescapable.

Whether the next generation of entrepreneurs chooses Missouri to start businesses and raise families depends in large measure on decisions Jefferson City lawmakers make about Missouri’s business climate in the coming months.

Chris Koster is Missouri's attorney general.

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