Missouri Tax Reform, ‘The Sequel’ Starts Again January 17, 2014

(AP) – Kansas is again being held forth as the prime example in Missouri’s renewed debate over whether to cut income taxes.
But rather than being touted primarily by tax-cut proponents, Kansas also was cited Thursday by tax-cut opponents concerned about the potential for falling state revenues and inadequate school funding.
A Republican-led Senate committee heard testimony on a trio of proposals – one cutting taxes only on business income, another reducing the individual income tax rate and a third phasing in tax cuts for both businesses and individuals.
The panel is expected to advance some combination of those proposals in coming weeks as majority-party Republicans try again to enact an income tax cut after Democratic Gov. Jay Nixon vetoed last year’s legislation.
“We are here for the sequel. Hopefully, it’s better than the original in the outcome,” Sen. Eric Schmitt, a Republican from suburban St. Louis who is sponsoring two of the bills, said as the Senate Ways and Means Committee began its deliberations.
As they did last year, lobbyists for business groups again pointed to tax cuts in Kansas and other neighboring states.
Over the past two years, Kansas has exempted the owners of 191,000 businesses from income taxes and sliced tax rates for individuals. Six of Missouri’s eight neighboring states enacted some sort of tax cut last year.
“We are surrounded by states that are beckoning our businesses and citizens to come to them,” said Woody Cozad, a lobbyist for the Gate Way Group, which represents various business interests and mega-political-donor Rex Sinquefield.
Missouri lawmakers are particularly concerned that businesses in the Kansas City area will relocate across the state line to take advantage of the new tax savings.
But opponents of an income tax cut said Missouri already is ahead of Kansas in economic indicators and could jeopardize funding for state services if it followed Kansas’ example.
Kansas revised its financial outlook downward in November. It forecasts that its 2014 general revenues will fall 7.6 percent short of the previous year and 8.7 percent shy of what the state collected in 2012.
The falling revenues have made it more difficult for Kansas to recover from previous education funding cuts that have left basic per pupil aid 13 percent lower than its peak in 2008.
Although Missouri hasn’t cut public school funding, its basic school aid is about $600 million short of what’s called for under state law. If Missouri income taxes are cut, it “may be utterly impossible” to catch up on school funding, said Otto Fajen, a lobbyist for the Missouri chapter of the National Education Association.
Legislative researchers project that a gradual 50 percent tax deduction for business income, which one of the bills proposes, could eventually cost the state $148 million annually.
But the Missouri Budget Project, a St. Louis-based nonprofit that analyzes fiscal issues with an eye on the poor, puts the potential cost at more than $500 million. The costs could be higher for other
A bill by Sen. Will Kraus, R-Lee’s Summit, would reduce the individual income tax rate to 5 percent, create a 50 percent deduction for business income, expand deductions for low-income individuals and exempt corporations’ first $25,000 of income from taxes.
It’s projected by legislative researchers to cost $945 million annually when fully implemented; the Missouri Budget Project puts its eventual cost at $1.8 billion. Tax-cut supporters contend the revenue loss could be made up at least partly by expanded payroll and sales taxes generated by businesses that use their tax savings to hire additional employees and expand operations. But Amy Blouin, executive director of the Missouri Budget Project, cast doubt on such assertions. She estimated Missouri businesses would have to create about 250,000 jobs to offset a $500 million tax cut. “We would have to practically import people from other states to create that level of growth,” Blouin said.

Mo. Senate Moves to Close Renters Tax Break Used by Many Seniors March 28, 2013

(AP) — More than 100,000 lower-income seniors and disabled residents who live in rented homes could lose an annual state tax break as a result of legislation given first-round approval Wednesday by the Missouri Senate.
The bill takes aim at an income tax credit created in 1973 that was intended to offset a portion of the local property taxes paid by low-income seniors. Over the years, the politically popular tax break was expanded to disabled residents and enlarged to provide a greater benefit to its recipients.
The Senate bill would abolish the tax credit for renters while leaving it in place for those who own their homes – a change recommended by a tax credit review commission appointed by Gov. Jay Nixon. It would redirect the $57 million of savings from the abolished tax break to fund existing state health, mental health and social services that may benefit seniors and the disabled.
Amy Bllouin of the Missouri Budget Project blasted the move.
She called it part of a “devastating tend of tax breaks for big corporations and the very wealthiest at the expense of low-income and working Missourians.”
The legislation needs another Senate vote to go to the House.
Nixon’s commission released reports both in 2010 and 2012 asserting that there is not enough evidence that rental costs are influenced by landlords’ property taxes. It also highlighted program discrepancies that deny the tax break to tenants renting from nonprofit organizations while granting it to those whose landlords are looking to make a profit.
Senate President Pro Tem Tom Dempsey described the current program as arbitrary.
“Depending on where you live, sometimes you qualify and sometimes you don’t,” said Dempsey, R-St. Charles, who is sponsoring the bill.

National Report Points to Ks.-Mo. ‘Border War’ as “Huge Waste” of Taxpayer Money January 24, 2013

A national report released Thursday morning charges the economic ‘Border War’ between Missouri and Kansas over jobs in the Kansas City metro area “is a vast waste of taxpayer funds, paying for the geographic reshuffling of existing jobs”, said Greg LeRoy, executive director of Good Jobs First and principal author of the report.
He called it “job blackmail”, as some states use economic developement money to keep companies to stay put, when they may, or may not have any intention of re-locating.
Leroy is with the ‘Good Jobs First’ organization. It bills itself as a non-partisan research center from Washington D.C.
Leroy authored a report that was released Thursday entitled, ‘The Job Creation Shell game’, http://www.goodjobsfirst.org/shellgame.
A statement from the group describes the ‘Border War’ situation, “Kansas and Missouri are singled out in the report for their use of programs such as Promoting Employment Across Kansas (PEAK) and the Missouri Quality Jobs Tax Credit in luring companies such as AMC Entertainment and Applebee’s from one side of the Kansas City metro area to the other.”
“The report also recommends that states end their business recruitment activities that are explicitly designed to pirate existing jobs from other states.”
It continues, “ It also suggests a modest role for the federal government: reserving a small portion of its economic development aid for those states that amend their incentive codes to make existing jobs ineligible for subsidies and certify that they no longer engage in raiding.”
The Director of the Missouri Budget Project Amy Blouin also criticized the ‘Border war’ job poaching in a statement from the ‘Good jobs First’ organization.
“Rather than spending precious state resources on tax credits that merely poach jobs across state lines, states should focus on investing in services that businesses rely on when making relocation decisions, like quality schools and transportation, affordable higher education, and the development of a skilled labor market.”
Missouri lawmakers are expected to work on tax reforms with an eye towards making economic development in Missouri more competitive with other states, Kansas in particular.
Missouri and Kansas, however, are not the only states the groups believes waste tax money poaching jobs from another state.
According to a news release:
“In Texas, the “deal-closing” Texas Enterprise Fund as well as a privately financed marketing group called TexasOne are used to brazenly lure companies from many states, including California.”

• “New Jersey has doubled down on both job piracy and job blackmail payoffs, continuing to lure firms from New York City-many of them Wall Street firms that were likely to come anyway.”

• “Georgia, which we rename the Poach State, stunned officials in Ohio when it successfully lured the headquarters of NCR from Dayton, where the company had been based for 125 years.”

• “Tennessee embodies all the policy contradictions. Its largest city, Memphis, is frequently the victim of poaching by bordering Mississippi, yet Tennessee created a whole new subsidy program to lure the North American headquarters of Nissan from southern California.”

• “The booming Charlotte region has job growth most states would die for. Yet instead of managing their growth, the 16 counties in North Carolina and South Carolina routinely poach jobs from each other, using both state and local subsidies.”

• “Rhode Island has long pirated jobs from Massachusetts, but when it gave a very large package to lure video game maker 38 Studios, founded by retired Boston Red Sox star Curt Schilling, the deal soon blew up and criminal prosecutions are now under way.”
“Huge job blackmail subsidies have left many taxpayers bitter in states such as Illinois and Ohio, and Sears Holding Corp. has continued to shed jobs despite getting a second nine-figure retention deal from Illinois,” the report claimed.

Mo. Budget Project Report Claims It Will Take Missouri 4 More Years to Dig Out of Budget Hole January 12, 2012

A report by the Missouri Budget Project says Missouri’s budget hole is deeper that first thought and it may take state another four years to dig out of it.
According to a Thursday statement from the Budget Project director, “Despite improving economic conditions, Missouri’s budget remains in a deep hole,” said Amy Blouin, Executive Director of the Missouri Budget Project. “To use a family analogy, while the state’s still earning a paycheck, it’s taken a huge pay cut in recent years. Just as groceries and gas keep getting more expensive, the state’s costs have gone up with inflation. But we’ve lost pay – it will take another four years before the state will bring in as much as it did back in 2008.”

The report may give some ammunition to state lawmakers who want to put a limit on state spending (see previous post).
The study says the budget hole is closers to $800 million. Previous estimates have put it in the range of $500 million.
The Budget Project has been critical of Republican state legislator’s spending choices in recent years. That criticism continues in this report.
It claims that state leaders of the past “made the right decisions”, to build roads and spend money on public education. It continues claiming some lawmakers now concentrate on giving tax breaks to large business and corporations. Missouri, like other states have struggled in the recession.
Governor Jay Nixon told a group in Excelsior Springs this week that he has made cuts each year he has been in office. He expects to have to make more cuts in state services again this year.
Nixon will offer the details of his budget next week when he delivers his State of the State speech.
More on the report:
http://www.mobudget.org/files/Missouri_Facing_Major_Budget_Shortfall_in_FY%202013.pdf.