Missouri: Good, Bad, and the Really Ugly

There’s a lot happening lately in the world of tax justice (or injustice as the case may be) in Missouri. Here’s a quick roundup:

The Good: Anti-Poverty Tax Policy

This week a bill to introduce a 20 percent refundable Earned Income Tax Credit (EITC) was heard before the House Committee on Tax Reform.  Representative Jeanette Mott Oxford and her thirty-five cosponsors should be congratulated for presenting this bill. 

ITEP’s written testimony on behalf of the bill made it clear that “eighty percent of the benefits would go to the poorest forty percent of Missourians — exactly the income groups who pay the largest share of their income in Missouri taxes under current law.”

In their testimony, the Missouri Budget Project said, “A state EITC could benefit as many as 440,000 Missouri families and is also proven to be a valuable economic stimulus, generating economic activity that would reach every corner of Missouri.”

State tax structures illustrate state priorities. If Missouri’s legislators prioritize generating economic activity and making the tax system fair for working families, they should pass HB581.

The Bad: Ballot Measures to Starve Local Governments

Early next month voters in Kansas City and St. Louis will be asked to decide if their cities should continue to have an earnings tax. If the voters in Kansas City reject their 1 percent tax on earnings levied on those who live or work in Kansas City, the city will lose approximately $200 million a year by the time the earnings tax is fully repealed, a staggering 40 percent of the city’s general fund revenue.

Last year, Missouri voters approved a law that bars Kansas City and St. Louis from continuing to have these earnings taxes unless they are approved by the cities’ voters. (The measure also blocked other local governments from adopting an earnings tax.) The ballot measure was largely bankrolled by Rex Sinquefield, an ideological, wealthy financier known for supporting conservative causes.

Now, the groups battling for and against these major city revenue sources are entering the final push. The Kansas City Star recently explained that the anti-earnings tax folks aren’t being honest. “Earnings tax opponents continue to highlight this statement on their website: ‘Cutting the e-tax would only require an annual 1.5 percent cut out of the budget over the next 10 years.’ We’ve been over this before, but it bears repeating: This statement is misleading and, worse, the critics know it but refuse to acknowledge the truth.”

The Ugly: Income Tax Repeal

In even worse news, Missouri’s Mega Tax Bill, HJR 8, passed both the House Tax Reform and Rules Committees and is expected to be debated on the floor of the House any day. The legislation would create a constitutional amendment to eliminate the state’s individual and corporate income taxes as well as corporation and bank franchise taxes, and replace the revenue with an expanded sales tax.

There are currently nine ballot initiatives that, if enacted, would make a similar radical change to the state’s tax structure. In a previous analysis of similar legislation, ITEP found that the bottom 95 percent of the income distribution would see a tax hike if the Mega Tax Bill were to become law, while the richest five percent would see tax cuts. It’s hard to get any uglier than that.