Missouri Republicans hope to pass a massive tax cut. Can they avoid Kansas’ troubles?

Missouri Republicans hope to follow the lead of their colleagues in Congress by pushing for deep tax cuts when the legislative session begins next week.

And looming over the debate is the specter of Kansas.

Republican lawmakers have already put forth a host of tax-slashing plans. The most sweeping, and the one getting the most attention, would not only cut Missouri’s top income tax rate and eliminate the bottom four brackets, but also would slowly phase out the income tax altogether over the next few decades.

That plan — which is sponsored by state Sen. Bill Eigel, a St. Charles County Republican, and state Rep. Travis Fitzwater, a Callaway County Republican — would try to offset the cost of those income tax cuts in the short term by reining in tax credits, moving toward collecting sales tax on online purchases and eliminating other loopholes.

It also would increase the state’s gas tax to 23 cents per gallon from 17 cents, although that money could be used only for road and bridge projects.

“This would be the largest tax cut in the history of the state of Missouri,” Eigel said in an interview with The Star. “We think this is going to benefit virtually every person in the state.”

Not everyone is as enthusiastic.

Traci Gleason, director of communications for the liberal think tank Missouri Budget Project, said some of the ideas in Eigel’s bill are long overdue, such as doing away with the discount for retailers that pay sales taxes to the state in a timely fashion.

Missouri Budget Project estimated that provision cost Missouri $114 million in 2016.

But Gleason said at a time when lawmakers have already struggled to find funding for health care, higher education and public schools, cutting income taxes could have long-term damaging effects.

“The fact of the matter is, we are coming up further and further short in our ability to provide for education, to provide for transportation, for public safety and a myriad of other things that Missourians rely on from their state,” she said.

Look no further than just across Missouri’s western border, Gleason said, to see what happens when lawmakers cut income taxes too deeply.

“Most troubling,” she said, “is Kansas lawmakers saw the mistake they made and were able to roll the tax cuts back. In Missouri, our constitution requires a statewide vote for a tax increase, so it would be very difficult to turn back.”

Fitzwater balked at the Kansas comparison. He said the bill he’s co-sponsoring with Eigel is “not a Kansas-level cut. We’re very thoughtful about how we’re managing the revenue compared to the tax cuts.”

Eigel said 90 percent of the tax cut is paid for in the bill. The remaining gap is “less than the average growth rate we’ve seen in Missouri over the last 10 years.”

The major problem with Kansas’ approach, Eigel said, was “they cut rates and revenue, but they were unwilling to make the corresponding cuts on the expenditure side.”

The idea that Kansas lawmakers didn’t try to cut spending is simply not true, said Duane Goossen, a former Kansas budget director.

It was ultimately the Kansas voters, Goossen said, who didn’t have the stomach for the budget cuts that would have been needed to offset the tax cuts.

Starting in 2012, when Kansas dramatically lowered its taxes, the state Legislature went through nine rounds of budget cuts, Goossen said.

Kansas lawmakers made cuts to public education and every state agency, spent down state reserves, diverted money from the state’s highway fund and even borrowed to try to make up for the loss of revenue from the tax cuts.

By the time lawmakers returned to Topeka last January, Goossen said, Kansas was in a full-blown financial crisis. Lawmakers ultimately rescinded most of the 2012 tax cuts.

“Kansas citizens would not stand for the kinds of cuts that would have had to be put in place in order to match the revenue loss from tax cuts,” Goossen said. “We had probably the most conservative legislature we ever had, and even that legislature could not cut things so deeply to make up for the loss in tax revenue.”

Tax cuts did not bring Kansas “any kind of economic boom,” Goossen said. “Since the tax cuts, Kansas has performed more poorly than the states around us and the nation as a whole on any major economic measure.”

Eigel said the revenue increases built into the bill would soften any short-term impacts to the state budget. Long term, he said, government will have to learn to be more resourceful.

“I’m a big believer that we can make our government a bit more efficient, that we can do a better job with the money that’s coming in, and we can actually ease the burden on the Missouri taxpayer,” he said.

Eigel’s bill also seeks to decouple Missouri’s income tax law from the federal tax code. Doing so would prevent another hit to the state’s finances caused by the tax cut bill passed by Congress.

Missouri is one of 20 states with laws automatically linking any federal income tax changes to the state tax code.

Because the federal tax cut bill roughly doubles the standard deduction for taxpayers, Missouri’s deduction would double as well.

Missouri Department of Revenue Director Joel Walters recently told The Associated Press that could cost the state about $100 million in lost revenue. Previous estimates had been much higher, ranging from $500 million to $1 billion.

“Our bill decouples our deduction levels from the federal government to make sure our budget isn’t impacted in a significant way,” Fitzwater said.

But that idea is already running into resistance from some Republican leaders.

Missouri Treasurer Eric Schmitt, a St. Louis County Republican, described the effort to decouple the state’s taxes from the federal government as an attempt to block tax relief for Missourians.

“I sincerely believe letting Missourians keep more of their hard-earned money is always the right thing to do,” Schmitt said in a letter to state lawmakers. “Allowing Missouri’s standard deduction to be nearly doubled is one way to achieve that goal, and I encourage you to remain steadfast in your opposition to any measure that would reverse or prevent that automatic change.”

This story was originally published December 26, 2017 at 12:54 PM with the headline "Missouri Republicans hope to pass a massive tax cut. Can they avoid Kansas’ troubles?."