Missouri Gov. Eric Greitens on Monday proposed major reductions in personal and corporate income taxes in his state.
“I think this is going to turbocharge the economy,” Greitens said, according to the St. Louis Post-Dispatch.
Congratulations, governor. You avoided the words “shot of adrenaline.”
But the danger of a Kansas-like tax cut disaster in Missouri is evident just the same. Last week, Greitens suggested the state take out a $250 million line of credit to pay tax refunds earlier. That’s hardly the sign of a fiscally healthy treasury.
But if Missouri lawmakers are determined to go down the tax cut road this year, there are several things to keep in mind.
The Greitens plan calls for reducing the top income tax rate from its current 5.9 percent to 5.3 percent. Corporate income taxes would be cut even more dramatically, from 6.25 percent to 4.25 percent.
The proposal includes a tax credit the governor claims would eliminate state income taxes for about 380,000 Missourians.
Reducing state income taxes isn’t inherently a bad idea. It turns into a nightmare, though, if lawmakers have to slash spending for schools, roads and health care to pay for the cuts. That’s what happened in Kansas.
Greitens wants to avoid the Kansas problem by raising other taxes. He’d eliminate a 2 percent business discount for timely payment of taxes, for example. He wants to limit the tax deduction for federal taxes and collect taxes from internet and catalog sales.
The governor claims closing those loopholes will provide enough money to cover the tax cuts, making the package “revenue neutral.”
We’re skeptical. Remember: Kansas Gov. Sam Brownback’s original tax plan included similar “pay-fors.” They were dropped in the rush to pass a final tax bill, however, leading to the Kansas calamity.
Missouri must not make that same mistake. Any tax measure must include tax hikes equal to the tax cuts. And the governor can’t rely on vague promises of “economic growth” providing extra revenue, either. We’ve seen that movie.
It isn’t entirely clear, by the way, that state lawmakers should spend a lot of time on a tax cut this year.
Missouri’s economy is strong, and its unemployment rate is low. Now is the time to invest more money in roads, schools and higher education — not waste a lot of legislative effort on a revenue-neutral tax package that merely shifts the tax burden.
Missourians should be disappointed the governor has not suggested higher gas taxes for infrastructure. In fact, he has yet to offer anything substantial on that critical need.
Missouri remains a relatively low-tax state (the tax burden grows when critics add local taxes to the mix, but local taxes are largely outside of the state’s control.) Still, it’s an election year, and tax cut fever may be unavoidable.
If the legislature wants to make this a priority, it should aim for tax reform that’s fair and truly revenue-neutral. Anything else is a Kansas-like budget crisis waiting to happen.