Show-Me Pocket Change

Listen to SJR29 Senate debate

March 5, 2010 · Leave a Comment

Americans For Prosperity-Missouri has yesterday’s Senate debate on SJR29 available HERE.

There have been a few changes to the bill: most significantly, the tax would be phased in over 5 years; two, and the state sales tax rate would be capped at 7%. From the Post-Dispatch, a list of all changes to SJR29:

  • The corporate income and corporate franchise taxes would be eliminated in the first year, while the personal income tax rate would be reduced by about 20 percent a year until it is phased out.
  • The sales tax rate would go up to offset the annual reductions in the income tax.
  • The general sales tax rate would be capped at 7 percent.
  • The sales tax would not apply to motor fuels, insurance, education (K-12, higher education and vocational education), charitable donations and purchases, food stamp or Women, Infant and Children (WIC) purchases. Other exemptions could only be added by a two-thirds vote of the Legislature.
  • Rebates would be given to all households. (No detail on how much.)
  • The Property Tax Credit (or Circuit Breaker) would be retained.
  • The plan would be placed on the November 2010 ballot, and if approved would become effective on Jan. 1, 2013.

I like the phase-in method.  Not that it is needed, but I would rather see a lot of people who are just concerned about the short time frame, but in general like the concept, to be able to get on board with this plan.

→ Leave a CommentCategories: Missouri Policy News · State Income Tax
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SJR29 debate right now in the MO Senate

March 4, 2010 · Leave a Comment

Listen live to the debate at www.senate.mo.gov and click on the Senate Live Debate in the right hand column.

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Jobs, and the jobby jobs that job them

February 24, 2010 · Leave a Comment

Tony Messenger’s article Jobs is the buzzword of the Missouri Capitol I thought had some great statements that really sum up a lot of my feeling about taxation and job creation.

The question for lawmakers: How to use the government’s power to create those jobs?

It’s a complicated question.

The House, for instance, passed a bill to give tax incentives to Ford to help retain jobs in Missouri, rather than lose them to another state offering more cash.

Then there’s a big push to create the “jobs of tomorrow” by creating special funds — a closing fund, a fund for science and technology businesses, a fund for investing with entrepreneurs.

Those funds need money, and that money, for the most part, comes from either giving companies tax credits or from reduction of income taxes. Both policies reduce the amount of revenue coming into state government.

Such programs, lawmakers and business leaders testified last week, are the core of the “jobs” programs that will pull the state out of its economic doldrums.

Not so fast, offers Sen. Jason Crowell, R-Cape Girardeau, who has become a bit of a tax credit curmudgeon over the past couple of years. Crowell testified last week in favor of bill of his, one of many he has that would try to rein in the state’s various “jobs” programs.

Why? Crowell doesn’t believe all those tax credit programs actually create jobs. He’s convinced they cost jobs.

Where? In schools, for one.

One of Crowell’s underlying points — and it seems to apply to so many of the “jobs” bills that get discussed in the Legislature — is that every such bill creates losers as well as winners.

A tax incentive here equals lost revenue somewhere else. To Crowell, that’s the part of the discussion that has been missing. You can’t just talk about creating jobs without talking about what happens on the other side of the equation.

The money has to come from somewhere.

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Missouri Myth Busters

February 24, 2010 · Leave a Comment

Americans For Prosperity-Missouri has some really informative Myth-Busters about taxation in Missouri: what hurts us now and what changes can help us grow and bring more jobs to the state.

Myth Buster #2


Myth #2: Sales Taxes are More Volatile than Income Taxes

Our last myth busters explained why Professional Services, such as lobbyists, will not be taxed under the tax reform measure commonly called the “Fair Tax”. As a recap, the tax base used to calculate the tax rate DOES NOT include business to business transactions. Professional Services performed for businesses, including non-profits, would not be taxed.

The next myth buster focuses on a statement made in several meetings that sales taxes are more volatile than income taxes. When I first heard the statement I thought it was a simple misstatement. The second time I heard it, I couldn’t believe it was being made on purpose. As Ronald Reagan said, “A man is entitled to his own opinion but not his own facts.” The facts don’t support the statement.

The Office of Administration provided the last ten years of sales, income and corporate taxes. We took the data and plotted it using FY2000 as the normalized base. Here is the result.

tax volatility

It is pretty clear that one of the certain benefits to getting rid of income tax in Missouri is a move to a more stable source of revenue. Add to that the fact that workers will have more money in their paychecks and the state will become instantly attractive to new businesses with new jobs, and you’ve got a plan that just can’t be ignored.

→ Leave a CommentCategories: State Income Tax · Tax Research
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KC Star details one of many special interest tax loopholes

February 22, 2010 · Leave a Comment

The Kansas City Star picked out one of many sales tax exemptions that smack of special interest: Yachts.

One of the most glaring inequities in Missouri is the list of sales tax exemptions that pick certain types of sales “entitled” to a break.

Even if you could make a good case about why boats as a category should be exempt from charging sales tax, which seems doubtful, it seems ridiculous to choose only one type of boat: one that is generally considered a pleasure craft.

This is one of the biggest flaws in equity in Missouri’s current tax code. Over time, politicians have slipped exemptions in for certain types of businesses they believe are more deserving of a break than other businesses. Some exemptions we may believe are valid and worth continuing, but it is clear that we need a higher threshold, and a defense against the misuse of the tax exemption.

Part of the conversation surrounding SJR29 is necessarily about special interests. This plan would effectively reset the clock on decades of carve-outs, and put a check on politicians who would seek to reward or pick favorites through tax loopholes with the following language:

The enactment of any new exemptions will require a two-thirds affirmative vote by the General Assembly and approval by the Governor.

The KC Star article shows the wrongheadedness of thinking about tax exemptions:

Thanks to a longstanding tax exemption, Missouri’s marina set can opt to pay a small fee in lieu of sales taxes and shave as much as $30,000 off the purchase of a $500,000 boat.

That tax exemption alone is depriving state and local coffers of more than $6 million a year, according to some estimates. It’s just one of more than 130 untaxed transactions that are getting renewed attention in Jefferson City because of the state’s continuing budget crisis.

But if you’re buying a small bass boat or runabout, forget about any tax breaks. You’ll pay the full load.

Boat sellers contend the tax break is a good deal for the state. The additional revenue that taxing large boats would generate would be more than offset by sinking boat sales and lost jobs, said Mike Atkinson of the Lake of the Ozarks Marine Dealers Association.

Well, Mike Atkinson is right. That lovely get-out-of-sale tax-free card is certainly a boost to Missouri sales of large boats. Perhaps folks are coming from around the country to buy big boats in Missouri. But why do we think yachts are more important than any other type of boat, or any other type of business sale?

The SJR29 sales and use tax applies to any sale to a consumer of a good or service. It wants all businesses to get the same treatment. It wants to bring all kinds of businesses to Missouri by eliminating the state income tax. It eschews special interests for a holistic statewide interest.

→ Leave a CommentCategories: Missouri Policy News · State Income Tax · Tax Research
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Small businesses flee Kansas City to avoid the earning tax

February 18, 2010 · Leave a Comment

Gib Kerr, a small business owner and commercial real estate broker, writes about how the earnings tax drives small businesses out of Kansas City in the KC Star.

Earnings tax repeal deserves full consideration

By Gib Kerr, Special to The Kansas City Star

Mayor Mark Funkhouser stirred up a new round of controversy recently by floating the idea of eliminating the Kansas City earnings tax, which brings in about $200 million to the city coffers every year.

Before a meaningful debate could even begin, however, the City Council voted 10-1 to cut off the discussion immediately, reasoning that the earnings tax is too sacrosanct to touch.

The mayor has earned an unfortunate reputation for consistently failing to build a consensus on important issues. This is nothing new. But Funkhouser is on the right track here.

The 1 percent earnings tax that Kansas City levies against residents and wage-earners in its jurisdiction is killing our town. The tax penalizes employment and gives people a strong incentive to live and work outside the city.

According to an article in The Star last fall, Johnson County is on the verge of surpassing Jackson County as the employment center of the Kansas City metro area. “Employment in Johnson County exploded 70.7 percent from 1990 to 2008” while Jackson County grew by an anemic 2.3 percent.

The common explanation for why people and employers have been gravitating toward the suburbs is that the schools are better. We hear this from residential real estate agents all the time. But what we commercial real estate brokers hear more often — when working with companies that are moving their businesses — is they want to avoid the Kansas City earnings tax.

Yes, we do have incentive programs such as tax increment financing, enterprise zones and tax abatement. But those tools are rarely pursued by the small businesses that generate about 80 percent of all new jobs. When large corporations in Kansas City obtain incentives, it is always big news.

But when a mom-and-pop small business – with five or 10 employees — opts to avoid the 1 percent earnings tax, the public rarely hears about it.

Small businesses — many, if not most, of which are Subchapter S or limited liability corporations whose earnings are taxed at the individual level — are quietly choosing to locate in places like North Kansas City, Overland Park or Lee’s Summit instead of Kansas City, principally to save 1 percent.

Generally speaking, large corporations pass the tax on to their employees, but small businesses feel the pain more acutely.

With its complete dependence on the earnings tax, City Hall is like a heroin addict. Its short-term desire for the next fix overwhelms any thoughts of long-term health. Meanwhile, the earnings-tax drug is slowly poisoning the body.

It is time for an “intervention” at City Hall. Weaning our city from the addiction to the earnings tax will not be easy. There is no quick fix. Recovery will start only when we acknowledge that we have a problem.

Let’s admit that we have a problem. Reasonable solutions, gradually enacted over time, do exist and should be debated. Let’s start by looking at the tax structures in place in surrounding municipalities. May the discussion begin.

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Overwhelming support in KC for vote on earnings tax

February 16, 2010 · Leave a Comment

While the Kansas City Star reports on some elected officials who want to keep the earnings tax in place so badly that they don’t even want people to vote on it, the sidebar tells a different story.

A poll asking “Would you sign a petition calling for a vote to repeal Kansas City’s earnings tax?” had clear cut results:

While online polls aren’t scientific, with 420 people responding, and 70% of them indicating that they would sign a ballot initiative that would trigger a vote on the earnings tax, it’s safe to infer that a lot of people want a chance to vote on the earnings tax in Kansas City.

The petitions would not eliminate the earnings tax. Instead, if petitioners collect roughly 95,000 valid signatures from at least six Missouri congressional districts, voters across the state would be asked to change the earnings tax law in November.

If those voters said yes, then voters in Kansas City and St. Louis would hold a referendum in 2011, and every five years after that, on keeping the levy. If local voters rejected the tax, it would phase out over 10 years and could not be reinstated.

So when elected officials, or anyone, argues against this ballot initiative, they are arguing against giving the taxpayers who pay this tax a chance to vote on it, either to affirm or phase out.

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Earnings Tax detractors not prepared

February 15, 2010 · Leave a Comment

Please take a gander at the Missouri Record Blog for their thorough coverage of the earnings tax debate. A teaser:

They were unable and–even resentful–of having to answer questions and yet nevertheless wanted to keep the people of Kansas City from registering their own votes on the matter.

Well, we may see a lot of that in the early efforts to give voters a say in their local taxes. See, the initial question isn’t whether you like the earnings tax or not. The first question being posed to voters by way of a ballot initiative is: do you think people in KC and St. Louis should be allowed a vote to either affirm or sunset the earnings tax.

Mind you, one of the choices voters will have if this language is placed on the ballot is to affirm that they do, indeed, want to keep the earnings tax. So when people stand against the ballot initiative, they are not really standing up in favor of keeping this derogatory tax. They are actually standing against you having the right to vote for something that affects your business, your job, your income and your city.

At Let Voters Decide, you can read the ballot language and sign up to get involved in the campaign.

Even if you think the earning tax is necessary for St. Louis and Kansas City, please consider that letting voters have a say in their taxes, and creating a mechanism whereby we can adjust the way we levy taxes is an important part of the way our democracy works. Having a vote about our taxation has particular significance to the way our framers and founders molded this government, so I think it is important to give people avenues to challenge and check their leadership.

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MO SJR29 passes out of Committee

February 11, 2010 · Leave a Comment

SJR-29, or the Senate version of the bill that would replace Missouri’s income tax with a sales tax, has passed out of the Senate Government Affairs and Fiscal Oversight Committee (GAFO). Now, if you recall Schoolhouse Rock’s ‘How a Bill Becomes Law’, getting a bill through committee is only one of the first steps, before being passed by both chambers and signed by the Governor: and in the case of this bill, it still wouldn’t be law until voters approved the measure on the ballot.

So why am I so excited about this? Well, last year’s bill (HB56 by Ed Emery) was passed by the House midway through session, but was killed in the Senate Ways and Means Committee before it even got a chance to be heard in the Senate. This year, the Senate is acting swiftly on progressing this year’s bill.

What’s different this year? Maybe a few things: While this bill isn’t identical to the national idea of the Fair Tax, the principle of not punishing people for working is the same, and the Fair Tax coalition is revved up, they are cohesive, they are driven, and they have rallied around this bill in Missouri.

Also, I think there is a true cross-section of people who believe this just makes sense, and they are getting involved and talking to their elected officials. Even people who haven’t been involved in politics before see the significance of this bill for the future. This is one bill that has the potential to give voters a say in the way they are taxed. It has the potential to create more jobs than any other ‘jobs bill’ out there, and that is a vital concern for so many people. For small business owners, for workers whose industries have been hit hard, a chance to bulwark Missouri industries of any stripe and create jobs and draw in customers may mean the difference that keeps them in business, employed & hiring.

What’s not different this year is the media’s askance glance at this bill. It would be worthwhile to let people really dig into this issue, and having media act as a hub for exploring this bill I think would help a lot of people. This bill, more than any other this year in Missouri, has so much power to address the grievous unemployment rate and give Missourians security, growth and dignity. I am going to keep coming back to that word: dignity. I think it’s really important, and is the thread that ties issues of business, employment, family stability, freedom and the American Dream together.

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Why do we need Tax Reform?

January 18, 2010 · Leave a Comment

Beverly Martin enumerates the issues Missouri is facing economically. This is why we need a substantial reform bill that does away with Income Tax and replaces revenues with a sales tax.

“Unemployment rate in Callaway, Cole and Boone counties ticked up a tenth of a point in August.”

“Missouri jobless rate … highest levels in the last 26 years.”

“Unemployment rate increased in Callaway County from 8 to 8.2 percent.”

“Cole County increased from 7.0 percent in July to 7.1 percent in August.”

“Boone County increased from 6.6 percent in July to 6.7 percent in August.”

“Even higher in other counties … 9.2 percent Audrain … 10.3 percent in Osage … 11.1 percent in Montgomery County.”

“1,847 Callaway County residents … unemployed.”

“Missouri lost another 6,700 jobs during August … statewide unemployment rate of 9.5 percent … from 9.3 percent in July.”

“Missouri manufacturing lost 3,500 jobs during August.”

“Construction jobs in Missouri fell by 1,600 jobs in August.”

“Administrative and support sectors shed another 2,300 jobs.”

“Leisure and hospitality vacation-related employment lost 1,400 jobs in August.”

“Kansas City area lost 3,200 jobs.”

“St. Louis area lost 1,300 jobs.”

(Figures quoted from “Jobless rate rises in Callaway, Central Missouri,” by Don Norfleet, The Fulton Sun, September 25, 2009.)

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