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Missouri taxpayers don’t have to look too far to find an example of the last time so-called budgetary savings were illusory—we can look at this year’s budget. When the FY 2025 budget was passed last May, our state’s elected officials celebrated their “conservative” budget. They said it was the first budget in a decade that was smaller than the previous year’s, which I noted at the time didn’t amount to much. It was true that the budget they initially passed did call for less spending than years prior, but in the months since, we’ve discovered that claims of budget cutting didn’t hold up.

When the budget passed last May, I explained that the totals were likely misleading, and the general assembly’s recent approval of a supplemental funding bill all but confirms it. To finish out the year, Missouri’s government needs nearly $2 billion extra dollars, with almost $400 million of that total coming from general revenue (state income and sales tax dollars).

As the above table shows, once you take into account all the funds that are truly needed for the year, this year’s budget exceeds last year’s by more than $700 million. What’s worse is that the general revenue portion is similarly higher than last year. This is problematic because not only is Missouri on track to spend more than the state projects to bring in (which was the case even before this extra spending was added), revenue collections are now behind where they were one year ago.

In other words, Missouri is in worse fiscal shape today than it was last year, and despite efforts to make it seem as though spending was being reined in, we’re once again on a path to spend more this year than ever before. As Missouri’s Senate begins its work on the state’s FY 2026 budget, it should be clear that taking real steps to rightsize state government is essential. Taxpayers should keep a close eye on the budget negotiations in the coming weeks. Legislators may try to sell Missourians on a bill of goods again.

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Recently, the White House unveiled its detailed framework for deploying nuclear energy, which emphasized the need for nuclear power in America’s future. This plan included an ambitious target to triple U.S. nuclear capacity by 2050. While this specific plan may not survive the transition, the sentiment is likely to endure.

Bipartisan Support for Nuclear

Both sides of the aisle recognize the potential in an American nuclear resurgence, albeit with different motivations. Part of the reason the Biden administration supports nuclear energy is because of climate change. Ambitious emissions goals are difficult to achieve without nuclear energy. The previously mentioned report argues:

Expanding domestic nuclear energy production has a key role to play in helping to avoid the worst impacts of climate change by enabling the nation to achieve a net-zero greenhouse gas emission economy no later than 2050. Nuclear power delivers safe, clean, reliable, and affordable electricity.

The Trump administration’s support hinges largely on reliability, capacity, and energy security. Members of the first Trump administration have advocated for keeping plants open, investing in SMRs (small modular nuclear reactors), and continuing to modernize the Nuclear Regulatory Commission. The president-elect recently affirmed this stance:

Starting on day one, I will approve new drilling, new pipelines, new refineries, new power plants, new reactors and we will slash the red tape. We will get the job done. We will create more electricity, also for these new industries that can only function with massive electricity.

Outside of the Oval Office, another notable example of nuclear momentum is the passage of the ADVANCE Act, which is designed to spur advanced nuclear construction and streamline regulations. This bill flew through Congress with an 88–2 vote in the Senate and a 393–13 vote in the House of Representatives before being signed by the president.

Bipartisan Action in Missouri

Nuclear energy is unique in that it is safe, powerful, and environmentally friendly. It is the most reliable energy source, and some claim it produces the lowest amount of greenhouse gas emissions over the lifecycle of the power plant. Public awareness of these benefits is increasing, as Bisconti Research found that favorability for nuclear energy increased from 49 percent in 1983 to 77 percent in 2024 among the U.S. public.

In the past, nuclear energy may have been viewed through a partisan lens, but today, it represents a solution to address some of our nation’s key concerns. This upcoming legislative session, lawmakers in Jefferson City should come together to craft meaningful policy that will help bring more nuclear power to the Show-Me State.

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Get the scoop from the experts at the Show-Me Institute at our Insider’s Hour!

Join us at one of two open discussions with Brenda Talent, James Shuls, and Elias Tsapelas from the Show-Me Institute.

Two chances to get the scoop: 

Both Wednesday, May 22

Lunch Event

MAC West

1777 Des Peres Road

St. Louis, MO 63131

Doors open: 11:30 a.m.

Discussion and Q&A: 12-1:00 p.m.

Ticket Price: $15.00 (includes lunch and beverages)

Lunch Event Tickets Here

Evening Event

Cafe Napoli

7754 Forsyth Boulevard

St. Louis, MO 63105

Doors open: 4:30 p.m.

Discussion and Q&A: 5-5:45 p.m.

Ticket Price: $15.00 (includes a beverage and light snacks)

Evening Event Tickets Here

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For months, I’ve been expressing concerns about this budget. After years of record-breaking spending growth, the well of exorbitant federal funds will soon be drying up, and state tax revenues are expected to decline or remain stagnant. Not to be deterred, in January, Governor Parson laid out his plan that recommended more of the same, including spending more than the state expects to bring in. Over the next few months, the House of Representatives worked to pare that plan back, ultimately finding some (but not enough) savings.

Over the past month, the Senate had been working on its version of the budget, but to no avail. Due to an apparent combination of time constraints and chamber dysfunction, the spending plan didn’t see the Senate floor until the day before Missouri’s constitution requires it be passed. The result of this delay was a budget that almost no one had seen in advance, yet still had to be approved by both legislative chambers over a matter of hours. All this had to happen without anyone making any changes.

The problems with this process should be obvious. Instead of each chamber having its own version of the budget to compare against the governor’s, and a conference committee process to reconcile differences, the compromises were made outside of the public eye. Instead of taxpayers being able to see how each chamber prioritizes spending, the lack of conference meant that there was no avenue for input from citizens on the final product. And instead of lawmakers having several days, if not weeks, to examine the proposed budget and suggest amendments, they were stuck with a take-it-or-leave-it offer.

Unsurprisingly, the approved budget looks like it leaves much to be desired. As Missouri’s legislators are fond of saying, passing the budget is the general assembly’s sole constitutional responsibility. Given the gravity of the assignment, it’s incredibly disheartening that the process played out the way it did. Over the next few weeks, I’ll continue unpacking the spending decisions of our elected officials. At this point, what’s clear is that Missouri desperately needs more budget transparency, and what happened this year should never be allowed to happen again.

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Produced by Show-Me Opportunity

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To be fair, if the House budget becomes law, it will be Missouri’s first budget in more than a decade that is smaller than the previous year’s budget. Not only is the House budget smaller than last year’s, it’s also approximately $2 billion smaller than what Governor Parson recommended for next year, which represents a small step in the right direction.

It should be noted that the budget process will now move to the Missouri Senate—the chamber more accepting of higher spending in recent years. It’s therefore still too early to tell if the state’s streak of record-breaking budgets is coming to an end.

The recent budget negotiations in Jefferson City also served as a reminder of how much things have changed for Missouri financially over the past several years.

• Missouri’s total budget has nearly doubled since Fiscal Year (FY) 2019, growing from a little more than $27 billion to $53 billion this year (FY 2024).
• General Revenues (mostly state income and sales tax collections) have increased by significantly less, going from approximately $10 billion to more than $13 billion over the same period.
• The biggest driver of budget growth has been the temporary influx of federal funds associated with the federal COVID-19 pandemic relief and infrastructure packages.
• The federal share of Missouri’s budget has grown from around 30% to closer to 50%.
• While Missouri (much like the rest of the country) has dealt with record-breaking inflation in recent years, state spending growth has outstripped the increase in prices, and has even grown faster than the state’s population and economy.
• Going into next year, the state will lose access to the billions of temporary federal dollars, all while state general revenues are expected to remain relatively flat or decline.

Keep in mind that the extraordinary state spending growth in recent years occurred even though Missouri’s constitution includes a balanced budget requirement—the requirement does not apply to federal funds.

There are myriad reasons to think the road ahead will be a tough one, and cutting spending will be a mandatory part of the equation. That’s why I’m happy lawmakers in the House took the measures they did to start turning the tide on state spending, even though I wish they’d gone further. I’m also looking forward to the Senate debating its spending plan in the coming weeks, with the hopes that members of the Senate also share the House’s view that spending should be reined in.

But with so many important spending decisions left to be made, and such dark clouds ahead in Missouri’s financial future, state taxpayers should join me in waiting until the budget makes it across the finish line before considering whether to celebrate any savings.

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What is the debt ceiling, and what would have happened had we not raised it?

The debt ceiling (or debt limit) is a legal limit on how much money the U.S. government is authorized to borrow. Once the country reaches this limit, the Treasury is not permitted to issue more debt.

Can we simply not raise the debt limit?

The Congressional Budget Office (CBO) projects that the federal government will run a deficit of more than $1.5 trillion in 2023 alone, with spending amounting to $6.4 trillion and revenue coming in at $4.8 trillion. Of the $6.4 trillion in spending, $4 trillion is for mandatory programs that operate without Congress needing to regularly reauthorize them (e.g., Social Security and Medicare), $1.7 trillion is discretionary spending, and $660 billion goes to interest payments. Balancing the budget and eliminating the deficit in one fell swoop would require essentially zeroing out discretionary spending or making instant, draconian cuts to mandatory programs. Given the deep fiscal hole that the federal government has put the country in, there was no real alternative to raising the debt ceiling.

If both sides agreed that the debt ceiling had to be raised, what were the negotiations about?

Historically, occasions when the government has reached the debt ceiling have produced negotiated agreements that both raise the ceiling and limit spending, as was the case with the Budget Control Act of 2011 during the Obama-Biden Administration. However, this time around, the White House insisted for months that it would not negotiate on any spending reforms as part of raising the debt ceiling.

Given the unsustainable fiscal path that the United States is on, the White House was essentially sending the message that the only way to avert a debt crisis now (by raising the debt ceiling) was to cement the current spending trajectory in place—and thereby increase the chance of a debt crisis down the road. The House of Representatives disagreed with this false choice between a debt crisis today and a debt crisis later and instead passed the Limit, Save, and Grow Act, which simultaneously raised the debt ceiling and slowed the trajectory of spending, among other reforms. Passage of this bill forced the White House to the table, abandoning its no-negotiations stance on spending reforms.

What is contained in the debt ceiling deal?

The debt ceiling deal contains a number of elements. First, it raises the debt ceiling through the end of 2024 and it establishes spending caps for fiscal years 2024 and 2025 that limit the growth of spending to 1% with tough enforcement provisions during the appropriations process, which is when Congress formally makes detailed, program-level spending decisions. In addition, the bill prescribes a 1% cap on spending growth through 2029. By way of comparison, the CBO projected an 8.1% jump in discretionary spending between 2024 and 2025, followed by average annual increases of 2.8% through 2033.

Besides affecting topline spending, the debt ceiling bill rescinds certain COVID-19 and IRS funds, expands work requirements for food stamps and welfare, and implements energy-permitting reforms to reduce delays from excessive and unresponsive bureaucracy.

What is the overall effect?

The CBO projects $1.5 trillion lower spending growth (or in Washington, DC parlance: cuts) because of the deal. Without the deal, discretionary spending would have risen from $1.7 trillion in 2023 to $2.4 trillion in 2033, whereas now the projection is for $2.2 trillion in discretionary spending in 2033.

To give further perspective, the figure below plots three different projections for the path of discretionary spending as a percentage of the country’s annual economic output. The blue dots are CBO projections made in fall 2019 under the previous administration and before COVID-19. The orange dots are CBO projections from this May, but before the debt ceiling deal. The red arrow showing the upward shift from the blue dots to the orange dots represents the persistent increase in discretionary spending under the current administration’s policy plans. The gray set of dots represent discretionary spending under the debt ceiling deal, with the green arrow showing the reduction relative to what was slated to occur before the deal.

As the figure makes clear, the debt ceiling deal essentially takes discretionary spending halfway back to the path it was set to follow before COVID-19 and the change in administration.

Figure 1: Discretionary spending as a percentage of GDP. Source: Congressional Budget Office, Show-Me Institute calculations.

How should Missourians view this deal?

The United States faces a profound and troubling fiscal situation with its unsustainable spending levels, not to mention slow economic growth, declining productivity, and inflation that remains much too high. It is important to recognize that the country has a spending problem, not a revenue problem. Federal revenues are currently above historical average, but the reason deficits are so large is that spending as a share of GDP is higher than it has ever been over the past century except during peak COVID-19 and World War II. The debt ceiling bill does not fully reverse the spending increases of the past two years, but it represents a step in the right direction, especially compared to the White House’s previous no-negotiations spending stance.

Taking a step back, whereas the debt ceiling debate focused on discretionary spending, the vast majority of federal spending goes to mandatory programs, chiefly entitlements. The CBO projects that, absent reforms, federal spending will rise from 23.7% of GDP in 2023 to over 30% by 2053, annual deficits will more than double to over 11% of GDP, and the national debt will balloon to almost 200% of GDP. In this scenario, interest payments on the debt would triple as a share of the economy and would represent the single largest spending item for the U.S. government. Even this scenario is rosy in that it assumes an infinite willingness among investors to buy U.S. debt regardless of how dire the fiscal picture becomes—a rather implausible assumption that America would be wise not to test.

Going forward, much work remains to be done to right-size government and revitalize economic growth so that Americans can enjoy a more prosperous future free from the risk of steep tax hikes, crippling inflation, debt crises, and adversarial foreign governments buying up large quantities of government debt. The debt ceiling deal is by no means a cure to the country’s current fiscal ills, but it’s one step in the right direction, and the starting point for a much-needed national conversation.

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But perhaps the most interesting recent development on this subject happened Tuesday night. As part of the House’s annual budget debate, amendments were repeatedly added to spending bills that would explicitly stop state funding from going to DEI programs—not only in higher education, but in other state departments as well.

Now that the budget bills go to the Senate, this language will likely change or even be removed by the upper chamber. We’ll keep you posted on the progress of the budget bills and on the other anti-loyalty oath initiatives. The legislation remains a long way from crossing the finish line.

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The bill would cut the top rate on personal income taxes, cut the corporate income tax rate in half and exempt Social Security payments from taxation. State Rep. Dirk Deaton, R-Noel, said the bill would promote economic growth, noting that future tax cuts included in the bill only take effect when triggered by revenue growth.

“This is really just limiting the growth of government,” Deaton said. . . .

The bill would accelerate a tax cut approved in September that will reduce state revenues by almost $800 million annually when fully implemented. The corporate tax cut would be the second in less than five years.

House Speaker Dean Plocher, R-Des Peres, made a corporate tax cut a top priority for the chamber as the session opened.

For the individual income tax, the rate would drop from 4.95% to 4.5% immediately, eventually dropping to 4.05% after a series of triggers. The corporate income tax would drop from 4% to 2%, and then to 0% after a series of triggers. The exemption for all social security income would be immediate.

I’ve pushed for reductions and eliminations of the individual and corporate income taxes for years, so it should come as no surprise that this plan is music to my ears. Income taxes are the most destructive taxes from the perspective of growth, and among them, corporate income taxes are the most destructive of them all. Reducing both with the intent of eventual elimination is sound policy.

Further, while the targeted social security carve out is understandable, eliminating taxation for certain groups of people can make the overall objective of reducing and eliminating a tax for everyone more difficult over time, with fewer and fewer people carrying the cost of government. This concern applies to an even greater degree to corporate handouts like economic development tax credits, such as the one for film studios being debated this session. Fortunately, economic development tax credits aren’t involved in this bill, at least not yet.

Thankfully, the scope of HB 816 and 606’s “targeted” tax policy is limited; the bulk is solid in principle and practice. We’ll keep you posted on the bill’s progress.

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Republicans in the House of Representatives will vote on a bill that would abolish the Internal Revenue Service (IRS), eliminate the national income tax and replace it with a national consumption tax.

Fox News Digital has learned that the House will be voting on Georgia Republican Rep. Buddy Carter’s reintroduced Fair Tax Act that aims to reel in the IRS and remove the national income tax, as well as other taxes, and replace them with a single consumption tax.

The vote on the bill was made as part of the deal between House Speaker Kevin McCarthy, R-Calif., and members of the House Freedom Caucus and was pushed forward in his quest for the gavel last week.

Am I saying there’s a chance?! No, not really. The Senate and the president will almost certainly reject abolishing the income tax, and it’s not entirely clear that even the House has the votes to pass it through the chamber. Then there’s the sticky issue of repealing the 16th Amendment, which enabled the national income tax; if this law were to pass, you’d need to repeal the amendment so that we won’t someday end up with both a sales tax and a renewed income tax! Details, details.

But is a national move away from the income tax the right idea? Undoubtedly. Income taxes are destructive to growth at all levels of government, and as Institute analysts press for the elimination of Missouri’s income taxes, our federal counterparts should consider similar tax reductions and reform. Whether this latest effort is the best approach or even has a snowball’s chance of success remains to be seen, but I’m glad the conversation is at least being had. It’s overdue.

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About the Speakers

Senator Jim Talent

Senator Jim Talent brings over 30 years of government and political experience including service in both chambers of Congress. He is a nationally-recognized leader on military affairs whose counsel is frequently sought by administrations and members of the House and Senate on both sides of the political aisle. During his service in the U.S. Senate and U.S. House, Senator Talent served on each chamber’s Armed Services Committee where he worked to advance a strong national defense and military readiness. In the U.S. House, in the aftermath of the end of the Cold War, he was a vocal opponent of cuts in the size and strength of the military On the Senate Armed Services Committee, he fought to rebuild the force, which even then was too small, too stressed and desperately in need of recapitalization. An advocate for expanding the U.S. Navy’s fleet to project American power abroad and keep the peace, he chaired the committee’s Naval Power Subcommittee.

James Jay Carafano

James Jay Carafano, a leading expert in national security and foreign policy challenges, is the vice president of Heritage’s Kathryn and Shelby Cullom Davis Institute for National Security and Foreign Policy and the E. W. Richardson Fellow. Carafano is an accomplished historian and teacher as well as a prolific writer and researcher. His most recent publication is “Brutal War” (Lynne Reinner, 2021), a study of combat in the Southwest Pacific. He also authored “Wiki at War: Conflict in a Socially Networked World” (Texas A&M University Press, 2012), a survey of the revolutionary impact of the Internet age on national security. He was selected from thousands to speak on cyber warfare at the 2014 South by Southwest (SXSW) Interactive Conference in Austin, Texas, the nation’s premier tech and social media conference.

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Missouri should be as cognizant of the benefits student-athletes provide public universities as any other state. The University of Missouri athletic department brought in $107.3 million worth of revenue in 2018, and its men’s basketball ticket revenue rose nearly 70 percent after signing highly-touted recruit Michael Porter Jr. in 2017. Although student-athletes do receive a sort of payment in free tuition and room and board, this compensation often pales in comparison to the massive sums of money the players generate. Shouldn’t Missouri allow student-athletes greater opportunities to profit from their position in the market?

Other states are already addressing the question of student-athlete compensation. Both Colorado and California have proposed bills in the past few months granting student-athletes the ability to sign endorsement deals, superseding the authority of the NCAA. Federal legislators have even gotten in on the action, as several members of the House of Representatives have introduced a bill that would alter the tax code definition of an amateur to allow college athletes to profit from public appearances.

Legislation like this provides benefits for all involved parties. It allows student-athletes whose performance merits it to earn money without imposing costs on universities. Since schools no longer use third-party endorsement deals or individualized merchandise, students profiting from such deals wouldn’t interfere with university revenue. Moreover, providing these opportunities to student-athletes may give Missouri schools an edge in recruiting battles. In short, these policies introduce the free market to college athletics, and if Missouri acts it could be a win for the state.

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During the debate on the House floor, several legislators discussed the program’s benefits for communities and low-income individuals alike. It bears repeating that individuals can support increasing the supply of affordable housing without supporting the LIHTC. The LIHTC program is notoriously expensive given its low return on investment. One legislator commented that the last year the Missouri program issued credits, the state’s investment of more than $160 million only resulted in around 1,000 low-income developments. When combined with the federal portion of the credit, taxpayers are on average subsidizing each new development to the tune of at least $320,000. If most Missourians wouldn’t spend that amount on their own homes, why should they be expected to subsidize that amount for others?

Additionally, multiple legislators discussed the reform efforts as a way to improve the program’s efficiency. While it was good to hear legislators admit many of the faults of the program outlined in multiple auditor reports, their “reforms” are not enough. If policymakers accept the program is currently ineffective and inefficient, why not consider a different program that could work even better? As I’ve said before, the LIHTC program is far from the only way to improve housing options for Missouri’s low-income population. And even if it was, why wouldn’t lawmakers discuss including a provision that guarantees the program is revisited in future years to ensure newly added reforms offer measurable improvement?

Of course, the best outcome for Missouri taxpayers would be to leave the state’s LIHTC program dormant. This would save more than a billion dollars over a decade. With such little time left remaining this legislative session, why are lawmakers rushing to restart the LIHTC program when there is still a better deal for taxpayers to be made? Every bad idea deserves an endpoint; let this year be the LIHTC’s.

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