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What Is The Matter With Missouri?

by Brent Mead / /

Perhaps a harsh title, after all, Governor Nixon and the Missouri legislature are looking at ways to boost employment and they are doing it in at least a nominally revenue neutral manner.

The jobs package being debated can be found in either SB 2 or SB 8. Both are being heard September 7, before the Senate Jobs and Economic Development Committee.

The rough basics are a $360 million proposal to create an aerotropolis plan at the St. Louis – Lambert Airport. About $300 million of the tax credit package would go towards incentivizing warehouse construction with the bulk of the remainder going to carry-forward cargo operators. Other side projects include expanding the Quality Jobs Program, which offers a tax credit for businesses who hire a net number of positions at a certain wage level. Also included is a credit for advertising for amateur athletic sports competitions. The entire package is financed by acting on last year’s Tax Credit Review Commission’s recommendations to sunset or eliminate about a dozen tax credits.

The problems with the package are numerous. The Show-Me Institute covers the basics of the aerotropolis plan. In short, the tax credits would only apply to new warehouse construction, despite a glut of unused storage capacity in the area. Furthermore, Missouri has not undertaken the sort of long-term cost-benefit analysis necessary to adequately study such an endeavor.

Some of the other new or expanded programs carry potential for abuse as well. In that same report, the Show-Me Institute highlights a case where Liberty Mutual Group received $1.6 million in taxpayer subsidies under the Quality Jobs Program despite laying off 45 employees and then offering to rehire those same employees at a lower wage.

However; all that said, the real problem is that this proposal varies from the status quo only in who the state has picked to be winners and losers. Governor Nixon’s proposal simply shifts the tax burden from one special economic class to a new special interest. All Missouri citizens and businesses should have the benefits of a low tax burden, not just a select few.

If Missouri wants to compete globally and against it neighbors the state must look to lower this burden. Tennessee already has no state income tax. Kansas and Oklahoma are looking at doing the same. ALEC’s Rich States, Poor States highlights precisely why Missouri should go down this road. Over the past decade, Missouri has experienced relatively lower economic growth, a lower increase in tax receipts, and a lower growth in non-farm payroll. Tennessee’s smarter underlying tax structure led to these differences. If Missouri continues to rely on out-dated thinking that targeted tax credits can outperform broad based tax relief then it will continue to fall further behind.  

What is the matter in Missouri right now is the failure to seize an opportunity. The Missouri legislature can put an end to the government favoritism and offer broad tax reform that brings real relief to taxpayers that will make the state more competitive in the long run.