Over the past year, Kansas lawmakers have accomplished major tax reform and have managed to get the state economy back on track. These improvements are great for Kansans and challenge neighboring states to compete for business and job growth. Unfortunately, some Missouri lawmakers have not learned the lesson.
By TIM JONES
Special to The Star
The Kansas reform plan reduced the income tax system to two tiers rather than three, decreased the top and bottom tax rates and will phase in even more reductions to the state income tax over the next five years.
Additionally, the plan included an exemption for all non-wage income for pass through entities, such as limited liability companies and partnerships. Such improvements effectively eliminated the income tax for many small businesses in Kansas. The results of the reform have already improved the Kansas economy.
In 2012, Kansas had more than 15,000 new small business filings, the largest number in state history. Economists at Wichita State University project that Kansas will double its monthly job growth in 2013. The Kansas unemployment rate is currently 5.5 percent, down from 7.2 percent in January of 2010.
On the other hand, Missouris unemployment rate has plateaued at 6.6 percent. Perhaps most troubling for Missouri is the Kauffman Foundations small business climate ranking, which gives Missouri a C and Kansas an A.
In order to remain competitive with our neighbor, Missouri legislators made a serious push for pro-growth, pro-jobs tax reform in the General Assembly this past session.
Our plan would have exempted 50 percent of non-wage pass through income from taxation, cut the corporate income tax rate in half and lowered the personal income tax from 6 percent to 5.5 percent.
Governor Nixon vetoed our plan, citing concerns about the fact that Missourians would be able to keep about $692 million of their own money each year once the tax cuts were complete. There is a chance the governors veto can be overridden.
Critics of our plan have been vocal in their skepticism that tax cuts spur economic growth. However, the record is clear that higher taxes negatively impact economic growth.
In the newest edition of Rich States, Poor States, a report by the American Legislative Exchange Council that ranks states economic climates using 15 equally weighted economic policies, Kansas jumped 15 spots in the ranking between 2012 and 2013. Sitting at 11th place, Kansas has adopted tax policies that make it more economically competitive than our own Show-me State, which fell from 7th place in 2012 to 23rd place this year.
The Rich States, Poor States report shows that states with no income tax outperform their high tax counterparts in the areas of job growth, domestic migration and even tax revenue growth. Over the past 10 years, the nine states with no income tax grew their overall gross state product by 40 percent more than the the nine states with the highest income taxes. States with a lower tax burden and a friendly business environment will continue to outperform their higher tax competitors.
Kansas has proven that competitive economic policies promote a business-friendly environment, attracting new companies and, with those new companies, more jobs. Kansas has a lower unemployment rate than Missouri and Kansas families get to keep more of their hard-earned dollars than Missourians. The facts are right in front of us. We cannot allow the Show-Me State to continue to lose economic competitiveness to Kansas.
Tim Jones, a Eureka a Republican, is the speaker of the Missouri House of Representatives.