Tax Experiment Proving Troublesome for Kansas EconomyRecent data released by the US Bureau of Labor Statistics shows what we have been saying all along: extreme tax changes do not help the economy, they hurt it.
Reckless Tax Legislation Slashes Funding for SchoolsSeveral bills filed this year propose the same recycled tax policies from last year, except some are even worse, blowing more than a $1 billion hole in the state’s budget. The results are the same too; the policies will take dollars out of classrooms, lead to tuition increases for college students, and stall Missouri’s economy.
Legislators recently passed Senate Bill 509, a dangerous tax scheme that would threaten Missouri’s economy. In the name of giving special tax breaks to corporations and the wealthy, Missouri would lose up to $800 million annually. Missouri’s schools, which are already significantly underfunded, would suffer dramatic funding cuts under SB 509 at a time when businesses are looking for educated workforces.
- SB 509 would undermine our state’s economy, hurt Missourians’ quality of life and make Missouri less attractive to business investment. SB 509 is a reckless tax scheme that will cost nearly $800 million per year once fully implemented. To put this in context, $800 million is fully one-fourth of state funding for K-12 schools. $800 million is more than what Missouri spent this year on public colleges and universities. $800 million is more than what Missouri spends on mental health each year. The spending cuts required by SB 509 would leave Missourians with more crowded classrooms, higher college tuition, eroding health and mental health care for children and seniors, and diminished public safety.
- SB 509 would hurt all sectors of Missouri’s economy – education included. Though SB 509 supporters claim that they have protected education and other vital services with a so-called “trigger” that would require growth in state revenue prior to tax cuts taking effect, the reality is that these triggers are just a smokescreen. The triggers don’t even keep up with inflation, so existing services would start to fall behind.
- SB 509 would hurt K-12 and higher education, making Missouri’s workforce less competitive. State funding for local school districts is already more than $600 million below the legally required amount. SB 509’s tax cuts would result in further spending cuts, ensuring Missouri could never fully fund our schools. Likewise, the state’s severe decline in higher-education investment has resulted in tuition nearly doubling for Missouri public university students over the past decade. SB 509’s risky tax scheme would require further steep tuition increases, making a college education less affordable at a time when employers are looking for a highly educated workforce.
- SB 509 would create costly loopholes, allowing businesses to game the system. SB 509 creates a new business-income deduction that would encourage businesses to game the system. Contrary to proponents’ claims, this loophole would fail to create new jobs.
- Missouri’s economy is already outpacing our tax-cutting neighbors. Missouri is adding jobs at a much faster rate than our neighboring states. Both Kansas and Oklahoma have recently cut taxes, but their economies are not thriving as promised. In fact, since their tax cuts took effect, Kansas is struggling to fund local schools and tuition for some public colleges increased by 9% in one year. The state is cutting services even through it increased its state sales tax, and local communities are increasing local taxes to try to make up for some of the state funding cuts.
- A provision in the legislation will create years of legal and tax policy chaos and uncertainty, and could be devastating to the state budget. Some legal experts have interpreted bill language to actually eliminate the top income tax bracket altogether, at a cost of $4.8 billion annually. While other experts disagree, a lengthy court battle is likely and would wreak havoc on Missouri’s economy, regardless of the outcome.
- If SB 509’s risky experiment fails, it would cause Missouri lasting damage that can’t easily be fixed. The state constitution restricts Missouri’s ability to raise taxes. This means that SB 509’s tax cuts cannot be overturned once implemented. Even if lawmakers realize they made a mistake during the phase-in of the cuts, they will not be able to stop them or restore Missouri’s revenue. Once made law, there will be no turning back.
- SB 509 would make it more expensive for Missouri to fund roads and major building projects. Credit rating agencies, which currently give Missouri a top-notch AAA credit rating, are likely to frown on the SB 509 tax cuts. This could hurt Missouri’s credit rating and raise the interest rate the state must pay to borrow money to fund major projects, like roads and buildings.
- SB 509 would pressure localities to raise property taxes. State funding for services would plummet in the wake of SB 509’s cuts. This would result in increased pressure on localities to make up the funding difference through property-tax hikes.
- Missouri is already a low-tax state. Further cuts are unnecessary to make us economically competitive. Research from the University of Missouri ranks Missouri’s taxes at or among the lowest when compared to our eight neighboring states. Even the conservative, anti-tax Tax Foundation ranks Missouri as the 16th best in the nation for business tax climate, easily surpassing our neighbors.
The Legislature recently passed SB 509, a tax scheme that when fully implemented would cost nearly $800 million per year. In context, the amount would be the equivalent of one-fourth of state funding for local K-12 schools, or more than what Missouri spent this year on public colleges and universities. It is also more than Missouri spends on mental health each year. The spending cuts required by the tax cuts would result in more crowded classrooms, higher college tuition, eroding health and mental health for children and seniors, and diminished public safety.
A comparison of the foundation formula funding under Gov. Nixon’s recommendations and under SB 509 shows that Missouri schools will lose $223 million if SB 509 becomes law. A district-by-district breakdown shows that every single school district in the state will lose funding under this bill. A total of 53 of Missouri’s 520 school districts will lose at least $1,000,000 under SB 509’s risky tax scheme.
Governor Nixon summed up the situation “The choice facing members of the legislature has never been clearer: they can support Senate Bill 509 or they can support public schools, but they cannot do both.” read more…
The Coalition for Missouri’s Future is disappointed that the Missouri House has chosen to do the bidding of special interests rather than focus on what Missouri needs to really build a competitive 21st century economy: investments in quality preschool through higher education, infrastructure and other critical services.
Tax cuts are not a strategy for economic growth, and these tax cuts are designed to help wealthy Missourians and large corporations, not average Missouri families. “While the wealthiest Missourians might benefit from SB 509 – particularly if they have an LLC or partnership – the bill provides little for the average Missouri taxpayer struggling to get by,” said James Moody, lobbyist for the Kansas City Civic Council.
Last summer, Missourians asked legislators to protect education and critical services throughout Missouri. But Senate Bill 509 would cost nearly $800 million, threatening state funding for education, health care, public safety, and social services.
“Missouri schools are already severely underfunded,” said Carter Ward, Executive Director of the Missouri School Boards Association. “Tax cuts would likely result in increased class sizes and reduced course offerings.”
Tax cuts are no way to build an economy. As seen across the border in Kansas, tax cuts result in reduced funding for schools. “It’s nonsensical to risk education when Missouri is preparing students to compete not just locally, but nationally and internationally,” said Roger Kurtz, Executive Director of the Missouri Association of School Administrators. “Missouri schools simply cannot absorb any additional cuts without more programs being cut or property taxes being increased.”
But it’s not just education at risk. In context, the bill’s nearly $800 million cost exceeds both the underfunding of the schools foundation formula and the annual funding for the Department of Mental Health. “Cuts to mental health services over the last decade have increased waiting lists for care, and resulted in shortages for acute psychiatric hospital beds,” said Misty Snodgrass, Director of Public Policy for the Missouri Coalition of Community Mental Health Centers. “This has real-world consequences for families and the community.”
The Coalition for Missouri’s Future urges Governor Nixon to veto SB 509 and any other tax cuts that reduce general revenue.
While campaign donors may appreciate their nearly $8,000 annual tax cut, average Missourians would rather the state invest their $4.75 a month in schools, infrastructure and other services that strengthen Missouri’s economic competiveness.
This legislative session, the Missouri General Assembly is considering several tax bills that could blow a $1 billion or more hole in the state’s budget. These tax schemes threaten Missourians’ quality of life and access to critical public services. If they were to become law, the consequences will be far-reaching: overcrowded classrooms, increased costs for college students, diminished public health and safety, and deteriorated public infrastructure.
This comes at a time when crucial state services are already underfunded. The K-12 education formula is currently $650 million underfunded and higher education funding is more than $100 million below 2001 funding levels. The revenue reductions from these tax bills will only dig these holes even deeper.
The proposed tax schemes prey on senior citizens who rely on state funding for nursing homes, in-home care, and meals on wheels. They will also force higher property taxes on the elderly, making it more difficult for them to stay in their homes
Businesses looking to invest in Missouri expect a sound transportation network, a qualified workforce, and a climate where entrepreneurs can thrive. Yet, these tax schemes will rob the state of these assets, causing disinvestment in education and workforce training, public infrastructure, and the overall quality of life of Missourians. This will be a detraction for businesses, and they will look elsewhere to grow and invest.
And after Missouri’s credit rating plummets, its borrowing costs rise, and its quality of life sours, Missourians will be stuck with the new tax scheme and its devastating consequences. The Hancock Amendment handcuffs the legislature’s ability to reverse course because it requires a public vote on most tax measures.
Proponents of these measures are looking to give a tax cut to the wealthy at the expense of the rest of Missouri citizens. Don’t let them destroy Missouri. Contact your legislators and urge them to vote NO on these disastrous tax schemes!
The Missouri General Assembly is considering tax scheme legislation this year that will take dollars out of classrooms and cut funding to other critical state services.
With a budget hit that could exceed $1 billion annually when fully phased-in, every public service is bound to be impacted, including state aid to public colleges and universities. Higher education is typically the first area of the budget hit when the state faces budget shortfalls. That means more pressure to hike tuition to make up the difference, which translates into a hidden tax increase on middle-class families with college students. Just look at Kansas. After making drastic changes to their tax structure, colleges and universities in the Sunflower State are making
up the difference by increasing students’ tuition at several times the rate of inflation.
The tax schemes will devastate financial aid and scholarships for higher education as well. These include the A+Scholarship Program, a program that pays students’ tuition for community colleges if they get good grades and engage in community service; Access Missouri, a needs-based aid program providing financial assistance to low-income families; and Bright Flight, a scholarship program that offers an incentive for Missouri’s most talented students to attend college in the Show-Me State. The tax schemes that the General Assembly is considering threaten all of these programs and many more, putting college out of reach for many students and making it more difficult for them to reach their full potential.
The cuts to higher education funding also will cause colleges and universities to reverse course on plans for new programs and initiatives designed to spur economic growth in their local communities and across the state. Higher education institutions often serve as the nucleus for local communities and, to a broader extent, serve as economic development incubators for the state. If these tax schemes take effect, Missouri’s economic engine will stall, leaving the Show-Me State on the sidelines, while states that invest in higher education thrive.