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.)

The Columbia Missourian ran a great letter in support of HJR56, which is a plan to replace Missouri’s cumbersome State Income Tax with a sales tax. Beverly Martin explains the change and tells us why this makes the most sense for a competitive, stable Missouri.

HJR56 will create an economic environment conducive to business growth. According to The Beacon Hill Institute’s Competitive Report (2008), Missouri’s overall ranking (29) and its Business Incubation ranking (32) indicates the need for tax reform.

HJR56 is simple and transparent. Unlike our current 10-layer tax code, HJR56 allows state taxes to be paid at the time of purchase of services and new goods. There will be no state tax on business-to-business purchases. Gone are the complicated and costly income tax forms. The savings in compliance costs to businesses is staggering. Money formerly used to find and game tax loopholes can now be utilized for growing businesses and/or providing better services to employees.

Eliminate the compliance cost of doing business (often referred to as the hidden tax or 23 cents per dollar of cost of purchase) and prices to consumers can be lowered. Companies choosing to not lower their product cost or to not pass on savings to employees will face the effect of market competition. Consumers tend to shop for the best price and consumers keep business doors open. Employees look for good benefits when deciding on job opportunity.

The complexity of tax codes hinders growth of businesses and negatively influences our ability to draw new businesses into our state. Private sector job growth in Missouri (18.5 percent 1990-2006) ranks second from last in our six state region as does our real GDP growth (40.7 percent compared to the national average of 50.2 percent) for the same period.

Who stands to be hurt the most by HJR56 passage? Lobbyist and politicians who depend upon the exchange of votes and donations for favorable tax codes. Educate yourself by visiting www.nomoincometax.org to find a FairTax group in your area.

Beverly Martin is a member of Callaway Citizens for FairTax. She lives in Fulton.

My dad lost his job recently. He’s been an engineer in plastics manufacturing for 30 years, at his last job for 15 years.

As a daughter, I am not sure what to do, and I weigh the desire to help my family with being respectful of their pride. By pride, I mean achievement, and the ability to provide for, rather than be provided for. By pride I mean dignity and humanity. Writing an enormous check to them might help the monetary needs my family faces, but it would destroy their dignity.

And that’s why I’m in favor of getting rid of Missouri’s income tax. I want for my family something that no amount of social services can provide or create: I want my family to have a stable job and the dignity that provides.

Nothing else is cutting it. My dad has had dozens of interviews with great reception, but every company he talks to are in a hiring freeze as much as they might need or want to hire him.

I believe logically, I believe because I don’t think anything works as well, that getting rid of the income tax in Missouri would immediately and perpetually grow jobs. This is, in my opinion, the most important function of government right now: to move into economic growth as quickly as possible. This is absolutely the best way to accomplish that.

While the removing the earnings tax raises serious concerns about how St. Louis will fund services, the St. Louis Post-Dispatch has aptly framed the conversation about why it needs to come under scrutiny.

They discuss the earnings tax as a burden on city businesses and individuals to solve the region’s larger sustainable growth (and, by proxy, issues of ongoing disparity, poverty and safety that are truly intertwined).

St. Louis levies a 1 percent tax on the earnings of workers who live or work in the city, and a one-half of 1 percent tax on city employers’ payrolls. It is the primary means by which people who live and work in the city do the heavy lifting for the St. Louis region — essentially funding what Ms. LaSala characterized as the region’s “social loophole.”

Public safety is the main purpose to which the funds ultimately are put. They are used to field what is by far the region’s largest law enforcement agency, to suppress crime that affects the wider region and to promote order and safety the region’s biggest business district and greatest cultural venues.

The earnings tax, in other words, really is a public safety tax. The $141 million collected annually roughly is equivalent to the budget of the St. Louis Metropolitan Police Department. It represents 39 percent of the city’s $366.5 million in general fund income.

Eliminating it without some form of replacement “would result in cuts to public safety services so deep as to end the City’s viability as a place to live, work and visit,” according to the fiscal note the city sent to in response to Mr. Sinquefield’s initiative petitions.

Eliminating the earnings tax would, in effect, be a stark message from the city residents and workers. They’d be telling the rest of the region: On matters of regional public safety, “we can’t take care of this for you any more.”

We don’t agree that the effect of the earnings tax on the city’s business climate is as negative as Mr. Sinquefield suggests. But it has some negative effect; if you can locate an office in Clayton or downtown, why not choose Clayton and save the 1 percent?

The e-tax has been an “enabler,” preventing the wider region from facing up to its shared problems. It has placed a disproportionate and unfair burden on city businesses and taxpayers in funding police services that provide benefits and stability to the entire region.

Even with the earnings tax, St. Louis is losing its ability to sustain the leading financial role in regional public safety. The city expects to face a $45 million shortfall in the budget year beginning July 1. Bridging it will require painfully deep cuts, approaching 10 percent. As the city’s largest single budget line, the police department will have to absorb some of those cuts.

This starts a good discussion. I think most earnings tax payers don’t understand what the earnings tax funds, and hopefully examining it will bring its strict purposes to light.

I imagine most people don’t think they have a choice, as with most taxes. But challenging the city to provide alternatives that allow and promote growth puts the people of St. Louis back in charge. It’s a way for voters to say: “You serve us, not the other way around.”

Missourinet’s Steve Walsh talked with Art Laffer last week, and Laffer had this to say about Missouri’s competitiveness:

“You want to make output and employment and production as attractive as possible,” Laffer told me. “You are in competition with the rest of the nation, whether you like it or not, and if a business locates itself in Missouri as opposed to Kansas or Ohio, you get the benefits of it and citizens of Missouri get the benefits of it. What you should do is make sure you have a tax structure and a spending structure that really makes people attracted to your state.”

A friend of mine, I’ll call her Ruth, works for a large corporation in a job she loves and is challenged by. She does performance audits and helps her St. Louis area branches learn efficiency, protocol and then keeps them in check.

The company has had to discontinue 401k matching and often decreased hours for hourly employees in an effort to save jobs. My friend remarked that she was glad they were working hard to keep from laying people off, and that she would be willing to get a little less if it meant her coworkers (or herself) would keep their jobs.

Wouldn’t it be great if your government felt they could do with less if it helped save a job?

Indeed.com has illustrated the best cities to be jobless in – best in that they have a higher ratio of job openings to unemployed persons.

I don’t think you’ll be surprised to learn that of the 50 largest metro areas, St. Louis was 42nd. Kansas City was 29th.

St. Louis, by this measure, appears to have lost 4 jobs/unemployed person, and has a ratio of 6 jobless/job opening.

KC was slightly less bad with only 2 lost jobs per unemployed person and a ratio of 5 jobless per job opening.

Granted, these numbers may be a little skewed depending on how many companies are advertising jobs vs. headhunting.

But I do think it provides a worthwhile benchmark and impetus for aggressively bringing new business to Missouri, and helping existing businesses expand.

Add that to Missouri’s unemployment rate and 3rd worst personal income declines, and you’ve got a recipe for a poor state economy.

Neither KC nor St. Louis made CNN Money’s list of top 50 cities to start a small business in (though Jefferson City did… hm). Nor did KC or St. Louis make the list of Small Business loan hot spots.

The Missouri Budget Project has put together an evaluation of Missouri’s income decline between 2000 and 2008, and find that Missourians income decreases are among the worst in the nation.

According to the St. Louis Business Journal

Median income in Missouri fell from $53,330 to $46,906 or by more than $6,000 between 2000 and 2008 when adjusted for inflation — the third-largest decline in median income in the nation.

The number of Missourians living in poverty increased steadily since 2000 and reached 13.1 percent or 780,000 individuals by 2008.

The number of Missourians facing unemployment reached 9.5 percent in August 2009, nearly three times the level of 2000.

This data confirms what a lot of people have been sensing lately: that Missouri’s economy just isn’t keeping pace. Missouri has been hit harder by national economic down trends and is less able to take advantage of improvements and recover than the nation in general. Rocky terrain leaves us further and further behind, now at the third-largest lost of personal income. Ouch.

We’re also hemorrhaging jobs. These are not problems specific to Missouri, but like someone with a weakened immune system we’re more susceptible to and get a worse case of whatever ailments are out there.

The Missouri Budget Project sees that as an indicator that we should spend more on programs that help the unemployed or impoverished. That would be nice, but, I fear, ineffective. Instead of throwing our remaining resources into the maelstrom, hoping to slow it down, I’d rather see Missouri counteract the force of unemployment, with a better tax policy that brings industry to the state instead of driving it away, that puts more money in people’s paychecks for something as little as dinner or as large as a new job opening for a small business.

The more we can attract good jobs and enable people to invest in the local and state economy, the better we’ll be able to weather economic downturn in the future, and the better we’ll be able to grow our tax base to support services for Missouri’s disadvantaged. The more Missourians keep of their paychecks, the less they’ll need to supplement with social services – and just from a dignity standpoint, we should want everyone to have access to a self-supporting job. Then, we’ll have the base to really help those in dire situations, and not just give mini-band aids to everyone.

Moving revenue collection to a state sales tax and discontinuing income tax is about creating an opposite reaction to what’s dragging Missouri down. The more Missourians keep of their paychecks, the more likely businesses will be to flee California and come here. Sorry, California. And California is a prime example of what happens when you eat all the seven-layer tax cake. The more Missourians keep of their paychecks, the more money we’ll have coming into our economy in a sustainable way, the more able small – and large – businesses will be to stay open and expand with new jobs. It pulls us in the right direction.

Miller-McCune has an article in their new blog “The Idea Lobby” that really startled me.

Basically, their graphing of political leanings in Congress that barely meet in the middle, while blades of concentration, both on the right and left, spread apart from one another.

I think it’s easy to see this impasse playing out, but it is a wonder.

From the article:

The full data suggests that this is not just a polarized moment in politics, but the most polarized the legislature has been in more than a century.

Posted in Government ]]> http://showmepocketchange.com/2009/10/14/wingspan/feed/ 0 msfrancon http://showmepocketchange.com/2009/08/28/pd-takes-e-tax-detractors-to-task-but-poorly/ http://showmepocketchange.com/2009/08/28/pd-takes-e-tax-detractors-to-task-but-poorly/#comments Fri, 28 Aug 2009 16:41:49 +0000 msfrancon http://showmepocketchange.com/?p=337 ]]>

The St. Louis Post-Dispatch editorial board came out with an editorial criticizing the Show-Me Institute’s studies on the earnings tax. It was unfortunately quite a step outside logical argument, so it feels almost silly to refute each point, but ah well.

Point: They offer no specific examples, relying instead on “abstract models and theoretical economists’ logic.”

Counterpoint: Uh, really? They are an economic think tank, not an anecdotal think tank. Their research projects data and trends based on widely accepted economic rules. You know, I sucked pretty hard in economics class, too, guys. It is scary to be in an argument where the data is really hard to grasp. But please do TRY and read some of their studies, which are very well broken-down for the economic-illiterate of us. Coincidentally, the first comment offers a very good concrete example. I’ll get to that later.

Point: Missouri is a relatively low-tax state by many measures. The earnings tax revenue has shown a rise of 16% between 2005 and 2008.

Counterpoint: Missouri is also a relatively low-growth state because of the type of taxes we have in place. These studies aren’t suggesting we’re in the same boat as, say, California, but rather that we miss out on potential growth by not adopting a smarter, less harmful tax policy. SMI studies have shown that sure, large cities with earnings tax grow, but they grow much less compared their suburbs than cities without earnings taxes. It is easy to say, “we’re doing OK!” but it’s uncomfortable to confront potential lost growth.

Point: City residents aren’t concerned about the earnings tax.

Counterpoint: Obviously, or they would have moved. How many residents who moved their families or businesses to the county were concerned about the earnings tax? That’s the number you really need to focus on. That’s a hard thing to nail down numerically, but the trend does exist, and for good reason.

Point: If we got rid of the earnings tax, we couldn’t support our police department and people would be less safe.

Counterpoint: WTF? No one is suggesting getting rid of a revenue source entirely (if the editorial board had read any number of SMI studies about it, they’d know that they recommend a completely revenue-neutral replacement). This amounts to a scare tactic, nothing less.

Point: People choose to live in the city for cultural, convenience and social reasons “…but the city earnings tax is a small part of the equation. Those who say St. Louisans would sell their loyalty for a penny shouldn’t be taken seriously.”

Counterpoint: Certainly people live in the city for many reasons. I live in the city. The earnings tax was not a part of my decision to move here, because 1.) I wasn’t aware it existed as a 19-year old, 2.) it wouldn’t have been anyhow, as the towns I lived in previously all had earnings taxes, and 3.) I wasn’t choosing between several jobs or locations; I didn’t have another option I was weighing. That’s probably true for a lot of people. Less and less true, however, for high-earning professionals and businesses.

The loyalty question is bogus and misleading. The earnings tax is not “a penny” because it is 1% of your earnings. Unless you’re only making $1 a year. In which case you don’t have to file taxes;) The earnings tax is more like $500-$1000 dollars every year for a family. Much more of you’re a business, and much more if you’re, say, a surgeon or any sort of in-demand professional. It looks more like a month’s worth of groceries or a mortgage payment. And if all one has to do to avoid it is move down the road a ways, it’s likely that it DOES figure into the decisions of families and businesses who live in the county. That means no earnings tax revenue or revenue of any other kind for STL: property tax, sales tax, municipal taxes, nothing.

Whew, that wasn’t too hard. I did want to end with a concrete example of the choice that especially businesses have to make when considering moving to St. Louis, from commenter jjk:

“In 1986, I started my company in shared space in Clayton and after a few months rented space in Midtown. Three years later, I moved it back to the county and the earnings tax was a big part of my decision. Had I stayed in the City, it would have cost me well over $300,000 out of pocket over the next 15 years, which I might not have minded if I felt I got any value for it. When I was there, they didn’t plow the streets when it snowed. We had to pay to park. We had winos sleeping on our front stairs. We had to walk women to their cars after dark and I had problems getting people to even answer help wanted ads once they heard where we were (we were on a major street near SLU)… The City was also very unfriendly to our company. Every year, I was audited by the City Revenue Dept which would send someone who started the conversation by accusing us of not paying the earnings tax. I would show them we used ADP, a third party payroll system which automatically calculated taxes based on the employee’s and our address, but the attitude never changed… When we moved, our staffing problems disappeared. Employees were happier and everyone got a 1% raise plus free parking. I realize they’ve cleaned up Midtown a bit since then and you can spin it any way you want, but I think it is going to be a tough sell.”

Posted in City Earnings Tax ]]> http://showmepocketchange.com/2009/08/28/pd-takes-e-tax-detractors-to-task-but-poorly/feed/ 1 msfrancon