Last August I wrote a short piece on how both the republican and democrat political parties find common ground as it relates to tax relief, when they decide to pick winners and losers by offering tax relief to certain groups in the form of targeted tax credits. Fortunately the republican party has at least offered up and passed legislation to cut income taxes for all Missourians, even going so far as to override Governor Nixon’s veto of the tax relief bill in 2014. The tax cut of 2014 doesn’t begin to take affect until 2018 and even then the state must reach certain benchmarks of revenue growth before even the first .1% is cut. The question we should be asking is “Is this enough?” I don’t think so.
Business Insider recently ranked the economies of each state based on a number of important factors including unemployment rates, GDP, wages, house prices and growth rates of nonfarm payroll jobs. Missouri’s economy came in 47th. That’s right, with everything we are constantly being told by the left about how Missouri’s tax climate is already competitive it turns out that it isn’t competitive enough. As it turns out, Missouri isn’t nearly as competitive as the left would like for you to believe and you need not look any further than the fact that our unemployment rate is at a staggering 5.8%. That’s .5% higher then the entire national average.
What is it about Missouri, even with a tax cut that might or might not go into effect, which keeps our state economy lagging behind nearly every other state in the nation? Is it that fact that we aren’t a Right-to-Work state? Possibly. Michigan, famed for its history as a bastion of Big Labor autocracy, became a Right-to-Work state in 2012 and is leading Missouri’s economy by 30 places, coming in at a remarkable 17th in the nation. In fact, Michigan’s growth of nonfarm payroll jobs has grown by 2.2%, even outpacing the national average.
Another reason that Missouri’s economy is 47th in the nation could also be attributed to our bureaucratic environment, especially where it concerns Missouri’s Department of Revenue. Earlier this year, I sat with the rest of the members of the House Committee on Ways and Means, and listened to one small business owner after another testify to the treatment they received at the hands of the Missouri department of Revenue. The issue centered on an interpretation of a tax that businesses weren’t even aware of and therefore none had yet paid. Instead of sending out notices to businesses, the Missouri Department of Revenue had begun the practice of notifying small businesses of their new tax discrepancy by simply showing up at the business for an unannounced audit. I am quite sure that we can attribute big government shenanigans like this to at least a small part of the reason why some businesses would rather take their jobs elsewhere. If nothing else, I’m sure we can all agree that this type of aggressive behavior by the government might make people think twice before risking it all to start a business in our state.
I would also strongly argue the reason for our lagging state economy could mostly be attributed to our tax burden. When the Mayor of St. Louis, Francis Slay, asked the CEO of Hardee’s, Andy Pudzer, why the fast food chain was looking to relocate out of state, the CEO replied that they were specifically looking to move to a state that had no income tax. Now that we know that Hardee’s is looking to take jobs out of our state and put them in a state with no income tax, is it possible there are others? INC. magazine pointed out in an online article in March of this year that many entrepreneurs and startups are moving to no-income-tax states to get their start. The obvious reason for this is because when a start up loses even 6.25% of its income every year to taxes, it runs an increased risk of going bust as opposed to if it were allowed to keep all of its earning. The idea here is that if a business gets to keep all of its earnings, it has more economic freedom simply because it has more wealth and therefor more choices in the market places as it competes for success.
Of all the issues that impact the growth of our state, I think the issue of taxation has the greatest impact overall. It affects everybody and every business regardless of the other related issues. We have a long way to go but I and other legislators like me get it and we aren’t giving up and hopefully we can elect a governor who will exercise some leadership on reforming our tax law in a way that offers both economic freedom and a cooperative and welcoming attitude to the industrious spirit of the people of Missouri and the people of America.