Missouri is a low tax state. That fact was corroborated again this week.
The Tax Foundation, a conservative think tank, released its annual analysis of state tax systems on Tuesday.
The national organization ranks the best and worst tax states using an index that weighs five tax categories — corporate, individual income, sales, property and unemployment insurance. States with lower taxes and simpler rules receive higher rankings.
Missouri’s tax code ranked 16th among the 50 states, the same as last year. Our state ranked fifth in corporate tax structure, seventh in unemployment insurance, seventh in property, 24th in sales taxes and 28th in the individual income tax category.
The ranking is designed to illuminate the “business tax climate” around the country, which the Tax Foundation argues plays a critical role in the economic health of each state, especially as states compete with each other for capital and labor.
Gov. Eric Greitens specifically touted the state’s favorable corporate tax ranking in his pitch to woo Amazon’s HQ2 to Missouri. He said the state was committed to making sure taxes and business costs don’t eat up all of Amazon’s profits.
We believe the governor is sincere in his pledge to keep taxes low. Without question, he has the backing of the Republican-dominated General Assembly, which has been aggressive in slashing taxes in recent years. Most GOP lawmakers say tax hikes of any kind are a nonstarter.
It’s no secret some lawmakers would like to see the state’s favorable tax ranking even higher — cracking the top 10 or even top 5 of lowest tax states in the nation. They argue that would spur even more companies to invest here.
That is the theory behind “trickle-down economics” that has propelled the tax reduction debate for decades. President Trump’s tax reform proposal, which is built, in part, on the same theory, has reignited the debate.
Will it inspire Missouri lawmakers, who are known to channel their brethren in Congress, to push even harder to whittle more taxes at the state level? Probably. Yet, clearly there are risks involved in reducing taxes in a low tax state. Just ask Kansas.
A 2012 tax-cut plan pushed by Gov. Sam Brownback didn’t provide the “shot of adrenaline” to the state’s economy as promised. Instead, it triggered painful spending cuts, borrowing and accounting tricks to maintain the state’s budget. In short, it was a disaster.
Angry voters responded in 2016 by replacing many of the lawmakers who supported the tax-cut proposal. A reconstituted Legislature was forced to rollback the tax cuts this year in an effort to get the state’s economy on a firmer footing.
We were reminded of painful spending cuts this week after learning Missouri lawmakers are still working to find a solution to avert $35 million in cuts to health care for low-income seniors and disabled people in this year’s budget.
Greitens was forced to make the reductions to balance a cash-strapped budget imperiled by previous GOP cuts to corporate taxes. He later vetoed an attempt by lawmakers to “sweep” various state accounts to restore the cuts, essentially calling it an accounting trick.
Even Republicans say it would be cruel to allow the cuts, which will impact the state’s most vulnerable citizens, to stand. But that is part of the collateral damage of living in a low tax, no tax hike, state.