Tax the rich, feed the poor
Till there are no rich no more?

More than 40 years after that song was released, the state of Connecticut is learning a lesson from  policies that heavily tax the rich. According to the Associated Press:

New figures released last week show tax revenue from the state’s top 100 highest-paying taxpayers declined 45 percent from 2015 to 2016. The drop adds up to a $200 million revenue loss for the state…

This latest drop in tax revenues paid by the wealthy, a problem for the past several years, has exacerbated Connecticut’s current budget woes. The projected deficit for the new fiscal year beginning July 1 has now jumped from about $1.7 billion to $2.3 billion, while the deficit predicted for the second year of the state’s two-year budget is now about $2.7 billion. The state’s main spending account, the general fund, is roughly about $18 billion annually.

As the headquarters of several hedge funds, Connecticut is especially sensitive to changes in that industry. Recent fund failures have meant that investors have sought to protect themselves from risk, meaning less profit and a double whammy for the Nutmeg State.

The commissioner for the state’s Department of Revenue Services conceded to the AP that “part of revenue decline can also be attributed to ‘a handful’ of wealthy individuals who moved to more tax-friendly states.” Imagine that. If your state levies higher taxes on the wealthy than other states do, the wealthy leave. The AP story also cites a similar example in New Jersey last year.

Soak-the-rich tax policies may seem great on bumper stickers and in song lyrics, but they are no way to run an economy. As we have written, in Missouri and elsewhere governments must compete against one another. Rather than penalize producers to cover for profligate spending, government should only tax what is needed to provide basic services effectively and efficiently.

To their credit, even Ten Years After wasn’t convinced of the merits of their proposal, ending with the refrain,

I’d love to change the world
But I don’t know what to do
So I’ll leave it up to you

The post What’s the Matter with Connecticut? appeared first on Show-Me Institute.

Despite the Governor’s claims, Missouri is not a low-tax state. We may have low taxes on gasoline and cigarettes, but when it comes to something important like your income, there are many other states with lower taxes.

Why focus on income taxes? Economic theory—and everyday experience—tells us that if you want less of something, you should tax it. That is the thinking behind carbon taxes. But while taxing carbon emissions may reduce the levels of CO₂, taxing labor income will reduce the desire to work. That is, raise income taxes and people will work fewer hours, which will result in less output.

In the end, higher income taxes stifle economic growth—and the creation of wealth. That is why tax rates matter. There is hard evidence indicating that states (and counties) with lower income tax burdens perform better economically than states with higher tax burdens.

With that in mind, the important question becomes: How do Missouri’s income taxes stack up against those of other states?

To answer this question, Rik Hafer and I used standard tax preparation software to calculate how much a family of four earning the U.S. median income had to pay in income taxes across all 50 states This allowed us to compare the tax burden in Missouri to that in other states. (The full report is available at ShowMeInstitute.org)

Contrary to the claim that Missouri is a low-tax state, we found that this average family of four would have to pay more in income taxes in Missouri than in 27 other states. Closer to home, that family also would pay more in Missouri than in Oklahoma, Nebraska, Kansas, and Tennessee. Our results are just one indicator that Missouri’s income taxes are not among the lowest in the country.

The Tax Foundation has compiled information regarding the top marginal income rates for every state. According to their calculations, Missouri has the 22nd-highest marginal income tax rate in the country. While this does not mean Missouri has the highest tax rate, it does mean that Missouri is not one of the lower-rate states, either. This ranking can understate how Missouri’s rates compare for most people. For example, California’s top tax rate is much higher than Missouri’s. However, Missouri’s top rate kicks in after $9,000 of income, and California’s kicks in after $1 million. In fact, many Californians face lower tax rates than Missourians of similar incomes.

Taken together, these rankings suggest that there is room for Missouri to cut taxes in order to remain competitive with other states. Nine states, including Tennesse—which borders Missouri—do not tax labor income at all. Kansas, Oklahoma, and Illinois all have top marginal rates that are lower than Missouri's. There are ways to help lower income taxes for Missourians without causing large revenue shortfalls. This includes broadening the sales tax base and cutting down on issuing economic development tax credits. If Missouri wants to remain competitive with its neighbors, it needs to build on the tax cuts it has already enacted and pass more tax cuts.

People who claim Missouri is a low-tax state are ignoring the taxes that really matter, like income taxes. For Missouri to be a low-tax state, there is more work to be done.

The post Taxes Are Still Too High for Missouri appeared first on Show-Me Institute.

State Rep. Tom Sands, R-Wapello, chairman of the tax-writing House Ways and Means Committee, said his preference would be to examine corporate and individual income taxes while exploring ways to simplify the tax system. Senate Majority Leader Michael Gronstal, D-Council Bluffs, said any tax cuts should be focused on helping middle-class Iowans.

“We will most definitely be looking at income tax reform, making the tax code flatter and simpler,” Sands said.

Sands added he hopes lawmakers will offer “substantial and meaningful tax cuts,” although he explained it’s too early to provide a specific dollar estimate because of uncertainties over state revenue.

Iowa is not the only border state looking to make income tax changes. In neighboring Nebraska, legislators (with the help of the Platte Institute) are exploring a round of tax cuts of their own that would also chop the state’s tax on incomes. On Missouri’s southern border, Arkansas is looking to cut its income taxes too, in part by getting the state’s tax exemption culture under control.

“They’re important to you; therefore, they’re important to me,” [Governor-elect Asa] Hutchinson told the [farming] group. “But we are now reaching a point in Arkansas that we need to look beyond more and more exemptions to our tax structure, and we need to look at an across-the-board reduction of our state income tax.”

Missouri lawmakers deserved applause for finally getting a tax cut across the finish line in 2014, but as we said at the time, that small cut alone is not enough to get the state on a firm, competitive footing for the years ahead—precisely because other states in the region weren’t going to stand still on tax relief. News out of Iowa, Nebraska, and Arkansas confirm this.

And make no mistake: The support for tax cuts has never been greater in the Missouri Legislature than it will be in 2015. Legislative leaders should not sit on their hands and let the opportunity pass them by. Our neighbors certainly aren’t.

The post Iowa, Nebraska, and Arkansas Legislators Gear Up for Income Tax Cuts appeared first on Show-Me Institute.

If “stealing jobs” were as bad as — and essentially no different than — stealing cars or stealing horses, Texas Gov. Rick Perry might expect to wind up at the end of a rope — the traditional fate in cowboy movies for horse thieves and cattle rustlers in the Lone Star State.

While that is not about to happen, the Texas governor has clearly been having a fun time infuriating some of his fellow governors in going to their states to pitch CEOs on the idea of relocating their businesses to Texas — one of only nine states (the others being Alaska, Florida, New Hampshire, South Dakota, Tennessee, Washington and Wyoming) with no state income tax on personal income. In venturing into California, Illinois, New York and several other high-spending, high-tax blue states, Perry has made a lot of speeches and spent some $2 million in TV ads singing the virtues of “limited government, low taxes and a fair legal system.”

Perry also made two visits to Missouri — in August and again in late September. In the earlier trip, he took Missouri Gov. Jay Nixon, a Democrat, to task for promising to veto the first tax cut in Missouri’s income tax in many years. As it turned out, even with heavy majorities in both houses of the Missouri legislature, Republicans were unable to override Nixon’s veto.

“Vetoing a tax cut is the same thing as raising your taxes,” Perry said in the commercials aired in several Missouri cities. “But there is a state where businesses flourish and jobs are created — Texas.”

That brought out the usual charges of “stealing jobs” in the two big-city, liberal dailies — the St. Louis Post-Dispatch and the Kansas City Star.

But if someone is guilty of “stealing” a job, someone else must own the job. But who?

How about no one? As Harry Stonecipher, the outspoken former CEO of Boeing, liked to say, “Only the customer can guarantee your job.”

In a competitive marketplace, no one really owns a job — not the jobholder, not the company providing the job and certainly not the governor of any state. Companies naturally gravitate to — and create employment within — the jurisdictions that provide the lowest costs of production, and taxes are an important part of the cost of production.

At the end of the day, there is no such thing as “stealing” a job. Like it or not, the states are in competition with one another in trying to attract and retain businesses focused on creating the greatest value for their customers, shareholders and employees. One of the keys to doing that is keeping the “tax price” in your location below that of competing jurisdictions.

Missouri should be focused on lowering the tax burden for all businesses. The best way to promote growth (and compete for jobs) is to get rid of all income taxes on business. Let the people who have earned the money put it back to work in their own businesses.

Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Is Texas Gov. Rick Perry Guilty of “Stealing” Missouri Jobs? appeared first on Show-Me Institute.

• Kansas City has a top marginal income tax rate of 7 percent — the state’s 6 percent income tax, plus the city’s 1 percent earnings tax. Kansas has an income tax of 4.9 percent. In 2018, it will be 3.9 percent. No earnings tax. We’ve said it before and we’ll say it again: Income taxes hurt growth, penalizing productivity and deterring greater investment. And this is to say nothing, of course, of the 100 percent deduction Kansans get for non-wage pass-through income. For Kansas businesses organized as LLCs, S-corporations, and sole proprietorships, the tax rate is effectively 0 percent. (And as we all know, 0 percent is also a lower tax rate than 7 percent.)
• Not counting its special taxing districts (TDDs, CIDs, etc.), Kansas City’s sales tax ranges from 8.1 percent to 8.85 percent, depending on the county. Those are pretty comparable to the rates charged on the Kansas side of the metro area — generally between 8 percent and 9 percent on sales, also not including special taxing districts. Not a huge difference. But what if we include special districts? Kansas City’s “1200 Main/South Loop TDD and DT Streetcar (KC Live!)” area — in other words, the Power & Light District — has the top sales tax in the bi-state area, with a whopping 12.35 percent tax on the sale of prepared food. (Click that last link to see the rates not only of the city, but also of the special districts. I found them startling.) One special tax costing a fraction of a cent may not seem like much, but put a few together and — as we’re seeing across the city — it adds up to real money. And the new, and bad, sales tax ideas keep coming.
• As our own David Stokes would note, apples-to-apples property tax calculations are tough to come by because property valuation norms can vary wildly from jurisdiction to jurisdiction. If I’m charged a 5 percent tax on a property valued at $100,000 by one set of assessing criteria, or a 6 percent tax on the same property valued instead at $83,333 using different criteria, I’m still paying the same amount in taxes ($5,000) regardless of the legislated property tax rates. Kansas property taxes, driven in Johnson County by taxes for schools, generally sit at higher rates, yet that doesn’t say a great deal on its own. What is notable on this front is that both Kansas and Kansas City have a bad habit of concentrating their property taxes on fewer and fewer taxpayers with special incentives. Check out the latest example on the Kansas City side; I’ll have more to say about that project later.

And we won’t even go into the city’s hotel taxes, rental car taxes, water and sewer fees, which are all high. Kansas City is one of the highest-taxed cities in the region, and Kansas Citians are the first to tell you as much. Especially after Kansas’ tax reforms, is it credible for Kansas City, Mo., policymakers to suggest the region has been or is tax competitive with its Jayhawk neighbors? Do they really believe the city’s businesses, particularly its small businesses, don’t know what’s happening in Kansas and won’t consider moving under these circumstances?

The post Is Kansas City A ‘Low Tax’ City? appeared first on Show-Me Institute.

Transcript:

It used to mean a football or basketball game, but now the Border War between Missouri and Kansas is more like a high stakes game of poker. Kansas has raised the ante by dramatically lowering taxes on both individuals and businesses. Governor Sam Brownback is betting that lower tax rates will ultimately mean more economic growth, and a bigger jackpot for the state.

So what should Missouri do?

Well its leaders can stay with a pat hand–one that has left the state lagging well behind others in growth–and risk having some businesses and citizens cross the border for the neighborly tax haven. Show-Me Institute economists say that could mean a loss of $300 million in goods and services, and 4500 jobs to boot. Or leaders can push for tax reform, lowering taxes and cutting tax credits so the state can compete, and maybe even win, the economic Border War.

This has been the Show-Me Minute. Learn more about the Show-Me Institute, where liberty comes first, click on our website at ShowMeInstitute.org.

 

The post Show-Me Minute: Border War appeared first on Show-Me Institute.

To reduce the potential revenue shortfall, the Senate reinstated a smaller sales tax increase coupled with a reduction in the amount of the tax cut. The top individual rate would be cut to 5.25 percent instead of 4.5 percent and the corporate rate would be cut to 5.5 percent instead of 4.75 percent. The phased-in deduction for pass-through entities would be cut in half.

I have frequently addressed the need for Missouri to undertake tax reform in order to stay competitive with Kansas. I am glad some kind of tax cut is moving forward in the Senate. However, I am concerned that by reducing the amount of the tax cut, its impact will be diminished. With SB 26, Missouri would still tax individuals and many businesses more than Kansas. I am not sure that this is enough to discourage many companies from leaving Missouri.

The House has a couple of bills that go further than SB26. However, they have not yet made it out of committee. Again, I am glad that the Senate is really pushing forward on tax cuts; I just hope it is enough.

The post Another Step Closer appeared first on Show-Me Institute.

Recently, Nebraska Gov. Dave Heineman proposed eliminating Nebraska’s individual and corporate income taxes. He also proposed eliminating $2.4 billion in sales tax exemptions (hat tip: Hot Air). This follows on the heels of Gov. Bobby Jindal’s proposal to eliminate Louisiana’s personal and corporate income taxes.

Not all proposals actually become law (case in point: Aerotropolis, thank heaven), but can Missouri really afford to sit back and hope these states, along with Wisconsin and Oklahoma, do not join Kansas in gaining a competitive advantage over us? Last year, my colleague Patrick Ishmael and I released an essay proposing that the state eliminate its corporate income tax. Considering the plethora of states looking at not only axing the corporate income tax, but the personal income tax as well, eliminating the corporate income tax might not be just desirable. It might be necessary.

Missouri is in a border war. It might not have chosen this fight, but it is in it nonetheless. It can respond by doing what it has been doing, issuing development tax credits and hoping for the best, or it can engage in serious reform to help make the state more competitive with its neighbors. The gauntlet(s) has been thrown down, how will Missouri respond?

The post Not Nebraska, Too appeared first on Show-Me Institute.

This ad exists because of a loophole allowing Missouri drivers to buy cars out-of-state without paying a local sales tax.  Now, I am not really a fan of tax loopholes. My displeasure borders on rage. However, the key point here is that taxes affect people’s decisions. We have seen that low excise taxes on gas, cigarettes, and alcohol in Missouri encourage people to buy these products in Missouri.

If it is worth buying ads to promote the fact that you will not pay a local sales tax if you buy a car in Illinois, then the tax advantages of moving an entire business to a new jurisdiction can be even more pronounced. That is why the Kansas tax cuts matter. By eliminating its tax on pass-through entities, Kansas made itself more attractive to businesses looking to gain any advantage it can in a competitive marketplace.

Missouri does not have to stand idly by while its neighbors continue to make themselves more attractive to businesses. In a forthcoming essay, Patrick Ishmael and I lay out the need for the state to eliminate the tax on pass-through entities.

A zero local sales tax liability matters so much that a car dealership believes that it is worth purchasing ads. How much are competitive tax rates worth to the entire state? If Missouri wants to compete, it should have a tax structure that allows it to do so.

The post Tax Rates DO Matter appeared first on Show-Me Institute.

In fact, the Missouri Department of Conservation announced last week that hunters had eclipsed the mark set in 2011 for deer harvested during the annual youth hunting season — over 19,000 deer, and a more-than three-fold increase above the state’s first youth hunt, instituted in 2001. Growing awareness of the hunt has no doubt increased participation in it over the years, but permit fees imposed by the state could easily have tamped down the season’s growth, if the costs were fixed high enough. Fortunately, Missouri’s hunting permit costs are generally quite low — and that’s a fact the Department of Conservation readily promotes on its website.

Low permit cost is another reason Missouri is a great place to hunt. Missouri’s $17 Resident Firearms Any-Deer Permit is a bargain compared to the average of $46.63 for equivalent privileges in surrounding states. Missouri charges only $8.50 for a resident any-deer permit for kids under age 16. Resident youths pay just $3.50 for antlerless-deer permits.

Missouri has kept the state-imposed costs of joining the hunt relatively minimal, and it’s reasonable to believe that participation in the youth hunt has risen at least partially because the barriers to engaging in it are so low.

Shouldn’t the state apply this lesson to other areas of policy? The lower the fees and taxes, the more likely it is that you’ll get more of an activity — here, hunting, but the idea applies elsewhere, too. Imagine: What would happen to Missouri’s economy from the perspectives of growth and competitiveness if the state got rid of its taxes on corporations and pass-through income?

Kansas opened the season for economic innovations earlier this year by dumping its tax on pass-throughs and reducing its income tax, but there’s no telling which state in the region is going to take down the big, long-term economic prizes in this highly competitive tax environment. Suffice to say, Missouri should join that hunt, and very, very soon.

The post What Missouri Could Learn From Its Deer Hunters appeared first on Show-Me Institute.

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.

The post Kansas Cuts Taxes . . . Missouri Businesses Suffer? appeared first on Show-Me Institute.

The post KTRS Appearance: Economic Tsunami Headed for Missouri? appeared first on Show-Me Institute.

The post A Kansas-Missouri Economic Border War Chat With Rex Sinquefield appeared first on Show-Me Institute.

Investors can, and often do, choose to invest their tax savings elsewhere, either overseas or in financial products that churn money but don’t create many jobs. Individuals amass great fortunes without becoming great industrialists. Companies today are sitting on $2 trillion in cash, which is a lot of oats.

The literature is mixed on the extent to which tax rates alone affect economic growth, but it is bizarre for the Post-Dispatch to assert later in its editorial that “[i]f cutting taxes doesn’t yield growth, increasing them is not likely to do so, either.”  That is an understatement. Ask those in Illinois whether raising taxes is helping that state’s economic growth. The Post-Dispatch suggests that the effect of the government cutting or raising taxes is comparable in effect but ultimately immaterial to whether an economy grows, which any business owner will tell you is absurd. Tax competition affects where capital pools and where businesses set up shop.

What the Post-Dispatch mistakes as a problem of tax rates is in fact a problem of tax structures. Companies do not hold onto money because they like taking the savings they gain from lower taxes to a Scrooge McDuck-style vault. If companies are sitting on money, they are probably doing it for a good reason. One reason might be that the economic environment is so uncertain that companies simply do not want to expose their capital to the risks inherent in the market at that time.

But another reason companies may sit on money is that the costs the tax structure imposes may outstrip the benefit of spending that money. If a company is going to get taxed one, on money that could otherwise be productive in the market place and two, at a confiscatory or otherwise burdensome rate, the company will probably try to protect that capital from taxation for as long as possible.

Therein lies the problem. Taxes on capital are among the most destructive in terms of growth. Among them, taxes on corporate income are possibly the worst. They remove from the economy money that otherwise could have been productive and siphon it away to pay for government programs that oftentimes grow nothing other than themselves. That is a tax structure problem, not a greedy business problem. To grow, an economy needs low, stable rates that do not punish productivity. The Post-Dispatch’s editorial fails to even briefly address this reality.

But maybe that was not the point. As I have noted before, it seems that the Post-Dispatch is always looking for ways of generating new revenues to the government. For example, from earlier this year:

A lot of folks purchased Mega Millions lottery tickets last week dreaming about what they could do with $640 million. Imagine what $4 billion would do for Missouri.

The point is that the way to pay for government services is not to try to more vigorously shake cash free from the money trees of free enterprise. The solution is to not punish the planting of new trees — to encourage productivity, not chop it down in a quest for revenue. Tax hikes are not the answer; fundamental reform to the structure of taxes is.

The post Taking Issue With the Post-Dispatch on Taxes and Growth appeared first on Show-Me Institute.

The post Sales Tax Pooling Should Be Expanded in Missouri appeared first on Show-Me Institute.

“. . . broadening the tax base will make the system more elastic; and shifting taxation away from business capital and labor earnings and toward consumption will make it more competitive . . .”

These are ideas that the Show-Me Institute has supported, including replacing the personal income tax with an expanded sales tax along with support for eliminating the corporate income tax.

Now, I am not saying that Kentucky will be overhauling its tax system tomorrow. Government commissions such as these have a tendency of not going anywhere (see Missouri’s Tax Credit Review Commission). However, Kansas recently cut its income tax. Both Nebraska and Oklahoma are looking to seriously overhaul their tax codes so one can forgive me if the fact that Kentucky now is considering tax reform makes me a bit nervous.

Missouri does not exist in a vacuum. What others states do has an effect on it. If other states scramble to cut or even do away with their personal income tax, what do you think that will do to Missouri’s economic prospects? Missouri needs to take bold steps to reform its tax code. If Missouri fails to act, it will fall farther behind.

Read more here: http://www.kentucky.com/2012/09/19/2342710/economists-suggest-big-changes.html#storylink=cpy

The post Falling Farther Off The Pace appeared first on Show-Me Institute.

The new law reduces the state’s top tax on wage income from 6.45 percent to 4.9 percent. Much more dramatically, however, it also abolishes the state income tax for many entrepreneurs and small business owners.

Under the new law, partnerships, S-corporations, and sole proprietorships are now exempt from paying any state income tax in Kansas. For example, if the owner of an S-corporation has $10 million in sales and $500,000 in “pass-through income” — meaning income after wages and other expenses — he would pay zero taxes to the state of Kansas on his $500,000 income.

Officials in Kansas make no secret of the fact that they want to promote their state as a Midwestern tax haven — appealing to entrepreneurs and small businesses in neighboring states, including Missouri, which has a top individual income tax rate of 6 percent, or $30,000 on $500,000 in income.

If small business owners in Missouri, Oklahoma, or other states want the same deal that Kansas is now offering to more than 190,000 small businesses, they just need to relocate to the Sunflower state.

How big a threat does this pose to the future growth and prosperity of our state? As economists, we can offer a few back-of-the-envelope calculations.

Missouri entrepreneurs in the 11 counties bordering Kansas would presumably be among the first to move. The population within these counties is 1.48 million people, or just more than 24 percent of the state’s total. For 2010, the total aggregate income of people filing individual income tax forms in Missouri for partnerships, S-corporations, limited liability partnerships, and sole proprietorships is $13.2 billion. Based on the population distribution, we would therefore expect that people with pass-through income in the border counties would account for roughly 24 percent of the $13.2 billion, or $3.17 billion.

Let us suppose that 10 percent of small businesses and entrepreneurs in those border counties deemed it worthwhile to move. That would translate into a $317 million reduction in goods and services and a roughly 1 percent reduction in income in the border counties. Based on 2011 income per worker, Missouri would see about 4,500 jobs go across the border.

Of course, people in other parts of Missouri might also elect to take advantage of the welcome mat that Kansas has put out for entrepreneurs and small business owners and that would further erode the base of our already weak and under-performing state economy. Entrepreneurs who might otherwise have launched their new business in Missouri may choose to launch it in Kansas instead.

Oklahoma Gov. Mary Fallin is advocating a reduction in her state’s top income tax rate to 4.5 percent from the current 5.25 percent, and she has cited the new Kansas law as cause for urgency. “Oklahoma needs to compete with our neighbors,” Fallin said. “To do that we need to lower our income tax.”

In a recent press conference, Missouri Gov. Jay Nixon sounded strangely complacent, saying “we haven’t spent a great deal of time talking about what they (Kansas) did.” With all due respect, we suggest that this is something worth discussing.

Our lawmakers need to start thinking seriously about creating a more favorable tax regime for economic growth and job formation in Missouri.

Joseph Haslag is chief economist and Michael Podgursky is a co-founder and director of the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post More Bad News for Missouri Competitiveness appeared first on Show-Me Institute.

I, and other members of the Show-Me Institute, have opposed raising taxes on cigarettes. However, if Illinois wants to send more of its residents fleeing to Missouri to buy cigarettes, then I will not talk them out of it. We could use the money. In fact, some legislators in Illinois fear that is exactly what will happen: “”We are going to lose revenue . . . from goods purchased across the border when people go to buy their cigarettes,” Illinois Sen. Kyle McCarter (R-Highland) said.

When the Show-Me Institute asked several visitors from Illinois whether they planned to stock up on cigarettes and other goods while in Missouri due to our lower excise taxes, many responded in the affirmative. It is likely that many more Illinois residents will feel the same way when this increased tax goes into effect.

So when people in Missouri advocate for increasing cigarette taxes, think about the state’s price advantage compared to some of its neighbors. Think about the potential customers that will be lost when the state no longer makes it worth their while to travel across the border to buy goods here. Also, think about how increasing taxes on cigarettes would harm the poor the most. Consider these things and be thankful that Missouri has not followed Illinois’ lead, at least, not yet.

The post Reminder From Illinois: It Could Be Worse appeared first on Show-Me Institute.

Supporters of TIF argue that it is a necessary tool for redevelopment in older
communities. Detractors contend that it is used to simply subsidize development,
and that variances in tax systems allow some governments to implement and benefit
from TIF even if its use harms other levels of government.

This study provides an overview of the history and basic structure of TIF. It then
analyzes the basic tax components of a TIF plan and compares how various aspects,
such as tax capture and tax competition, play out in the standard system of TIF. The
study then reviews the economic literature on TIF, and ends with a direct application
of how TIF operates within Missouri.

The post Tax Increment Financing and Missouri: An Overview Of How TIF Impacts Local Jurisdictions appeared first on Show-Me Institute.

Why is cutting corporate taxes important?

First, everything else being equal, cutting corporate taxes will leave more money available for business owners to reinvest in their companies. A company seeking to expand will have an easier time using its own profits instead of issuing debt or equity to raise capital.

Second, it’s fair.  As we have seen in Missouri, when legislators want to incentivize investment in the state, often they create targeted tax credit programs (like Aerotropolis). This allows the state to place a bet with taxpayers’ money on favored industries. Also, evidence shows that tax credits aren’t very effective. A corporate tax cut applies to every corporation in the state and thus companies can succeed on their own merits and not on how well-connected they happen to be.

Third, corporate tax cuts make a company more competitive. If Company A and B are in two different states and they make the same product at the same cost, but Company A has a higher tax rate than Company B, then Company B will have a competitive advantage. However, Company B would have a competitive advantage not of its own making; instead, the company would have an “artificial” edge due solely to its location. Company B can use that tax advantage to cut its prices and thus gain more customers than Company A.

Having a competitive advantage is important, especially in today’s economy. This applies to individual companies as well as states. If a state wants more job growth, then it needs a competitive tax environment. According to the U.S. Department of Labor (hat tip to Tax Foundation), most mass job relocations occur from one U.S. state to another and not to overseas locations. People in Kirksville, Mo., have more to fear about their jobs moving to Des Moines, Iowa, than to Delhi.

According to data obtained from the Tax Foundation, Missouri has the sixth-highest corporate tax rate compared to its neighbors (the states sharing a border with Missouri). However, if Missouri cut its corporate tax rate to 5.5 percent, it would have THE lowest corporate tax rate compared to its neighbors. In a time when every job is precious, and with the way things are in Washington, D.C., shouldn’t the state do everything it can to make doing business here more attractive?

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