Missouri taxpayers sending their kids back to school this month can shop for school supplies with a bit more confidence.
Beginning January 1, their paychecks will increase because of the state’s 2014 tax cut triggered this summer.
But major tax relief for all Americans must come at the federal level, where the effective tax rate for median Missouri families is about three times larger than the state burden. For state small businesses, which create the vast majority of the state’s jobs and generally pay tax at the individual level, federal marginal income tax rates reach 40 percent.
President Donald Trump visited Missouri last month to explain how federal tax cuts would help the state’s hardworking taxpayers and their brethren across the country. According to the Tax Foundation, passing tax cuts as Trump and congressional Republicans have indicated, would raise median Missouri household wages by $5,000 and regenerate the state’s beleaguered Main Streets by creating 33,000 jobs.
Missouri sends about $64 billion off to Washington D.C. in federal taxes each year, or about $10,500 for every state resident. More of this money should stay in Missouri’s communities where it is needed rather than be shipped off to Washington where it is not.
Despite the improving economy, many parts of the state are still struggling. The unemployment rates in many communities, including Kansas City neighborhoods around Blue Valley Park, approach and exceed 15 percent, according to the most recent data from the U.S. Census Bureau.
In contrast, Washington D.C. is booming at Missouri’s expense. The Washington D.C. metro area is home to the country’s four richest counties by median household income. This is wealth that is generated not by production but from money taken from local communities throughout the country by an overly burdensome federal tax system. The roughly half million full-time federal government employees who reside in Washington D.C. — and the millions more contractors and lobbyists who make their living off them — owe their lifestyle to a tax system that takes more and more from Main Street, USA.
Washington D.C.’s pain from a tax cut would be Missouri’s gain. A significant tax cut would immediately give well-deserved relief to the state’s working families and small business owners. Consider the results of a recent national poll of small business owners conducted by the Job Creators Network: Most respondents say they would reinvest their tax cut savings in the form of employee raises, new hires, and expansion.
A tax cut could boost wages twice: First directly at the paycheck level, then again in the form of a wage hike. This would address one of the most intractable problems of the economic recovery: stagnating wages. New data shows that four out of five full-time employees in this country live paycheck-to-paycheck. Any policy that can address this stubborn problem would dramatically improve national wellbeing.
Higher wages, more jobs, and business expansion would also stimulate Main Streets and help reinvigorate communities. This economic activity would help the country get back to its historic 3 percent growth rate, which would help offset the fiscal cost of the tax cuts.
The economic growth from federal tax cuts would produce more revenue at the state level, creating a circle of prosperity where state tax rates could be lowered further, helping Missouri families purchasing backpacks, binders, and gas to shuttle their kids around without worry. Such economic prosperity would mean a stronger Main Street, and a stronger America.
Tim Jones is communications director at the Missouri-based First Rule Media Network and a former Speaker of the Missouri House.