Missouri Senate Moves Tax Reform Bill Ahead to Respond to Kansas & Border War March 7, 2013

JEFFERSON CITY, Mo. (AP) — Attempting to keep pace with tax-cutting Kansas, Missouri senators endorsed a plan Wednesday to shave hundreds of millions of dollars off the income tax bills of businesses and residents. But the tradeoff could be higher taxes for shopping at stores and online.

The legislation given preliminary approval by the Republican-led Senate could mark Missouri’s most significant overhaul of its tax policies in a couple of decades.

Republicans expressed hope that it would spur an economic revival – or at least keep businesses and residents from being lured across the state’s western border by the siren call of lower taxes. Yet some Democrats called it “irresponsible,” noting that Kansas now faces a budget gap as a result of sweeping tax cuts that kicked in this year.

The Missouri legislation, which needs another vote to go to the House, would gradually reduce the state’s income tax rate by three-quarters of a percentage point over five years while gradually increasing the state sales tax by one-half of a percentage point over that same period.

In addition to an overall income tax cut for individuals and businesses, the new plan would roughly double Missouri’s current income tax deduction for people with adjusted gross incomes of less than $20,000 annually. The legislation also attempts to boost tax collections by tightening the requirements for when retailers must collect Missouri taxes and by joining a multistate compact that collects taxes from online sales.

When the income tax cuts are partially offset by the sales tax increases, the net effect could be a roughly $450 million reduction in state tax revenues, according to estimates from sponsoring Sen. Will Kraus, R-Lee’s Summit.

The nonprofit Missouri Budget Project, which analyzes financial issues with an emphasis on their effect on the poor, estimated that the Senate legislation could reduce tax revenues by $700 million when fully phased in.

Kraus emphasized that his plan doesn’t go as far as the one passed last year in Kansas, which cut income taxes without raising its sales taxes and now faces a projected budget shortfall of around $200 million for the fiscal year beginning in July. But he said his bill could make Missouri more competitive with its neighbor.

“I’m trying to stop the bleeding. I’m trying to stop the businesses from fleeing into Kansas,” Kraus said.

He proclaimed the plan “fiscally sound,” predicting it would “create an economic engine in our state” that would generate enough new tax revenues to make up for the losses.

But some Democrats warned that the tax cuts could wreak havoc on Missouri’s budget, making it even more difficult for the state to provide money to its already underfunded public schools. Senate Minority Leader Jolie Justus, D-Kansas City, was among those who called the plan “irresponsible.”

“What good are all these businesses going to be if we have a bunch of uneducated, unhealthy citizens?” Justus said during Senate debate.

Sen. Jason Holsman, D-Kansas City, suggested Missouri should wait to see the effect of the Kansas tax cuts.

“It may turn out that Kansas decides it wasn’t such a good fiscal policy to decimate their revenue,” Holsman said.

The recently enacted Kansas law reduced individual income taxes, increased standard deductions and exempted the owners of 191,000 partnerships, sole proprietorships and other businesses from income taxes. As a result of the ensuing budget gap, Kansas Gov. Sam Brownback has proposed to generate state revenues by eliminating income tax deductions for the mortgage interest and property taxes paid by homeowners. He also wants to cancel the scheduled expiration of a temporary sales tax increase.

If Missouri cuts its income taxes and revenues take a nose dive, lawmakers wanting to reverse course would have to seek voter approval to raise the taxes because of provisions in the state constitution, Holsman said.

Kraus, who is chairman of the Senate Ways and Means Committee, had brought a plan to the Senate floor last week that included income tax reductions only for businesses and for residents with income above $7,000 annually. He said he added the additional income tax deduction for lower-income residents at the request of Sen. Maria Chappelle-Nadal, D-St. Louis. He added the sales tax provisions in an attempt to bring down the amount of lost state revenues.

During debate Wednesday, the Senate also accepted an amendment by Sen. Scott Sifton, D-St. Louis, that pared back Kraus’ original plan to cut income taxes by a full percentage point and added an additional tax break that Sifton said would primarily benefit small businesses. Kraus supported the amendment.

KC Mayor James on Border War: ” We are Not Afraid of Kansas” February 8, 2013

Kansas City Mayor Sly James testifies to Mo. House panel in economic border war hearing

Kansas City-Mayor Sly James defended Kansas City and the Missouri side economies during a Committee hearing today.
Missouri lawmakers came to Kansas City to hear of the ‘ business poaching Border War. Kansas City and the state of Kansas have been battling over moving businesses back and forth across the state line. ” We are not afraid of Kansas,” James declared, “They don’t scare us”.
He called a series of personal and business tax cuts enacted in Kansas, “a bauble”, that may or may not work.
He said the bauble is, “cut all taxes and they will come”.
James pushed hard for state lawmakers to approve a new tax credit designed to attract new companies to the state
He also admitted the city’s main liability in the Border War may be education
The Kansas City,Missouri school district is one of 14 school systems in the city limits. The turmoil and controversy of a lack of accreditation and potential of a state takeover in that district often steers new residents away from the city James observed. He urged the law makers to pay attention to education policy.
James says ” education is the biggest economic development tool we have that we pay the least amount if attention to”.

McCaskill Calls KC Area ‘Border War’ “Dumb” February 1, 2013

McCaskill

Missourinet:
The Missouri-Kansas border war in the 1850s grew from disagreements over slave labor. Now, 160 years later, the two states again clash over jobs and the economy.
It’s a states’ issue, and Missouri isn’t the only state with metro citites on state lines. However, U.S. Senator McCaskill has a simple word to explain the battle for jobs between Missouri and Kansas ….
“I think this notion that regions don’t cooperate is really dumb,” she says.
“The strenghts of the greater Kansas City area lies in the fact that we have a region that is strong,” she says, “and I think it s unfortuante that Gov. Brownback has done some of the things he’s done.”
McCaskill says her sister’s family moved to Overland Park, Kansas, for the education opportunities, and that if Kansas continues the path it’s on, it could chip away at the very reasons people move there in the first place.
“If Sam Brownback is left to his own devices, it appears to me they’re going to have to start hollowing out education because he’s on a mission to underfund i think alot of the state services in the name of no taxes,” McCaskill says. ”Ultimately businesses come to a community because they believe they can have a great quality of life and a great education for their kids, so I think in the long run a lot of this may backfire on Gov. Brownback.”

Kansas Budget Hole Shrinking as Economy Picks Up January 11, 2013

Kansas is seeing its projected budget shortfall shrink because of better-than-expected revenue collections last month, according to a new estimate released Thursday.
The projection of $267 million represents the gap between anticipated revenues and current spending commitments for the fiscal year that begins July 1. The state expects to have a little less than $6 billion in revenues to finance education, social services and other government programs during that year.
The end-of-November projection for the shortfall had been $295 million, but the state saw a $31 million bulge in revenues in December, particularly in individual income tax collections.
Researchers said it’s not clear whether the unanticipated collections signal continuing economic growth. The incoming Senate majority leader, Terry Bruce, a Hutchinson Republican, suggested the bulge could have resulted from end-of-year tax planning.
“Every little bit helps, but we probably need to treat that bulge as one-time money,” Bruce said. “I’m going to proceed cautiously.”
Legislators must erase any projected shortfall during their annual session, which opens Monday.
The gap results from massive income tax cuts approved last year to stimulate the economy. The state reduced individual income tax rates and eliminated income taxes for the owners of 191,000 businesses.
Gov. Sam Brownback and other supporters of the tax cuts have acknowledged that a boost in economic activity would lag, possibly causing budget issues.
But critics contend — whatever the month-to-month projections — that the income tax cuts will lead to a permanent financial crisis.
“It’s very irresponsible and reckless,” said Senate Minority Leader Anthony Hensley, a Topeka Democrat.

Brownback On His Tax Cuts, His Ambition & Border War in Lengthy Star Report December 30, 2012

Kansas Governor Sam Brownback defended his policies dramatically cutting the Kansas budget, pointed to the Kansas city area as a laboratory for his tax cut plans and evaded a question about his political future in a lengthy article in Sunday’s Kansas City Star.
The Kansas Republican has presided over two years of budget cuts and reorganizing the state government.
He says his policies will trim state spending while protect “core” programs; public schools, public safety and protecting the State’s poorest and most vulnerable.”The days of ever-expanding government are over”, Brownback declares in the report, “Under my administration they will not return.”
The article says Brownback believes some of the changes he is advocating are also being tried in other states.
“The way you change America is by changing the states”, Brownback is quoted as saying at a conference of the Conservative Political Action Conference recently.
In the interview, the Governor doesn’t talk much about the potential for another run at the GOP nomination for President.
Brownback ran briefly for the nomination in 2008.
The report says he has not even talked to his wife about running for re-election in 2014.
“I am fully occupied,” he said in the story, ” I am staring at what we’re doing here now”
Brownback indicated the Kansas City may provide the most vivid example of the economic
Mic impact of his tax cuts. The basic premise of his economic policies is that a low tax environment will trigger a booming state economy.
“Kansas City is, I think, is the largest urban area that’s shared between two State’s…you’ll get a chance to see how this impacts a particular experimental area, and I think Kansas is going to do well.
Kansas City, Missouri area leaders have called for an end to ‘The Border War’.
The two states battle to shift businesses and jobs across the state line, but remain in the metro area.
The Missouri Legislature will consider some tax legislation in 2013 that may address the ‘ Border War’ dispute.
More : http://www.kansascity.com/2012/12/29/3986555/first-in-a-series-brownback-says.html