When the General Assembly reconvenes in a few weeks for veto session, the biggest question before the body will be whether to override Governor Nixon’s veto of HB 253, the first comprehensive tax cut to pass in Missouri in nearly a century. I voted in favor of HB 253 and will do so again at veto session.
Here’s why: economic growth matters.
States with growing economies have lower unemployment rates, decreasing welfare programs, and increased state revenue. To quote President Kennedy, “A rising tide lifts all boats.” States with stagnant economies have higher unemployment rates, more welfare, and frequent budget crises – all of which can work to start a vicious cycle of increasing taxes and fees to keep up with growing needs even though the result of such hikes is to slow or halt the economic growth needed for a state to move forward.
Today, it’s easier and easier than ever for entrepreneurs and job creators to move locations. As a result, Missouri must compete with surrounding states and other countries, like India and China, to attract investment. In an age where “the world is flat,” capital flows easily through the path of least resistance, including human capital.
So, how do we spur economic growth? Over the past decade, it’s obvious the legislature has taken the wrong approach. Instead of focusing on broad-based tax relief that lowers rates for all businesses, the focus has been on gimmicks and targeted tax breaks limited to businesses savvy enough to hire high-powered lawyers and lobbyists to petition the Department of Economic Development for special treatment. Unfortunately, this special favors approach has proven not to work for the larger economy. Often, it doesn’t even work for the savvy supplicant. (See Mamtek, as the worst example.) This approach has not worked. Over the past decade, Missouri has ranked 48th in the country in economic growth.
We need to take a different approach – one that incentivizes growth for all businesses and encourages entrepreneurial activity to grow Missouri’s economy. With HB 253, we reject the vicious cycle of tax hikes and further economic stagnation and choose a virtuous cycle of economic growth instead.
Of course, opponents of HB 253 paint a different picture. They take the vicious cycle approach and claim reducing tax rates puts education funding at risk. Governor Nixon has even taken the constitutionally dubious approach of pre-emptively withholding funding from education or other programs to scare certain representatives into voting his way. Opponents claim HB 253 will cost the state approximately $800 million. What they don’t tell you, however, is that (1) this cost estimate does not come from actual reductions in net revenues, but instead from slower increases in revenue, and (2) their analysis assumes zero economic growth from the reduction in marginal tax rates.
Another argument of opponents is that drafting errors with HB 253 should prevent the legislature from acting on this measure. Instead, opponents argue we should wait until next year. On this, the opponents have good points. All too often, the General Assembly acts with such haste in the last few weeks of session that drafting errors slip through the process. This isn’t a new problem – but it is one that we need to fix. In regards to HB 253, however, the legislature can and should take action now to lower the tax burden on all Missourians – and then immediately fix any drafting problems with the bill. I trust that Democrats will join us in clarifying the language in HB 253 on prescription drugs and the Marketplace Fairness Act.