Kansas Cuts Taxes . . . Missouri Businesses Suffer?

We have blogged a lot about the tax cuts that Kansas passed earlier this year. This is not an abstract concept. This tax cut not only affects people and businesses in Kansas, it also affects people and businesses in the surrounding states.

For example, Chris Seyer is a friend of mine from business school who helps run his family’s aerospace manufacturing firm, Seyer Industries. His family’s company pays taxes at the individual level. Many of Seyer’s rivals, such as Harlow Aerostructures LLC, are located in Wichita, Kan. Chris told me that if a competitor like Harlow is able to benefit from the reduced tax rates in Kansas, then it will have a competitive advantage. For example, if Seyer and Harlow both made $5 million before taxes, Seyer would have to pay $300,000 in taxes, while Harlow would not pay anything. Harlow could use that extra $300,000 for capital expenditures, or it could hire a couple of new employees, or it could save it for future needs.

Missouri should not be picking winners and losers by handing out special tax breaks or incentives. Instead, the state should make it as easy as possible for companies located within its borders to succeed and thrive on their own. Kansas took a large step in making businesses in the state competitive. Missouri is lagging behind. One possible way for Missouri to make up some ground on Kansas is to eliminate the state’s corporate income tax. Missouri could also look into phasing out the tax on pass-through entities. That would help Seyer Industries and a lot of other companies in Missouri.