JEFFERSON CITY – Missouri lawmakers are gearing up to fire the next shot in the economic border war between the Show-Me State and Kansas.
After watching Missouri’s neighbor to the west enact massive tax cuts last year, Senate President Pro Tem Tom Dempsey said lawmakers have no choice but to respond.
“The western side of the state isn't the only place where we are fighting to keep jobs and attract entrepreneurs, but at State Line Road it’s clearly evident our policies have us lagging,” the St. Charles Republican said. He later added: “Cutting income taxes will send a message to the rest of the country and the State of Missouri that we are headed in the right direction.”
In May, Kansas Gov. Sam Brownback signed legislation slashing state income taxes and eliminating them entirely for nearly 200,000 businesses. Legislative researchers estimate the Kansas tax cuts could create a budget shortfall of nearly $2.5 billion over the next five years.
Missouri won’t be following Kansas’ example entirely, Dempsey said, as many believe the cuts they've instituted could be unsustainable in the long run.
Senate Minority Leader Jolie Justus, a Kansas City Democrat, said the general consensus on the western side of Missouri is that Kansas’ tax policy is “incredibly reckless” and could lead to cuts to other programs, such as schools, health care and infrastructure.
“The cost of attracting new business to their state is going to end up very damaging,” she said.
Critics of the idea argue Missouri can't afford a tax cut. According to the Tax Foundation, Missouri ranks 47th out of 50 in state and local revenue collection. Since the state faces an underfunded K-12 school system and a crumbling infrastructure, they contend, reducing state revenue is not a viable option.
Any income tax cut, Dempsey said, must be balanced by increasing revenue in other areas – including legislation making it easier to collect sales taxes on online purchases and reducing the amount of tax credits the state issues each year.
His goal would be that the resulting cut would be revenue neutral.
“My philosophy is that we can’t dramatically cut taxes and expect for the growth in the economy to offset,” Dempsey said. “We’ve got to be more thoughtful.”
Several tax proposals have already been introduced by GOP lawmakers. One would cut taxes paid by Missouri businesses in half over the next five years. Another would increase the state’s cigarette and sales taxes while making the income tax a flat 4 percent.