Missouri’s legislative special session dealing with tax cuts is a reminder of how often in past decades tax-cut bills have become food fights for getting tax burdens reduced for a variety of special interests.
The governor’s original proposal was to cut state income tax rates and extend the expiration of existing tax breaks for various agriculture activities. But with a special session on tax cuts so soon before the general election, it reopened the floodgates for a pre-election food fight.
The food fight was demonstrated earlier this year when legislators unsuccessfully have sought to add a pile of tax cuts covering purchases of eyeglasses, diapers, hygiene products and food along with tax breaks for marijuana businesses, parents with unborn children and complete repeal of the corporate tax and proposals to repeal of the motor fuel tax increase passed in 2021.
Other food-fight tax-cut proposals have included exempting sales taxes on firearms, cancer treatments, photo-electric energy systems and even Kansas City World Cup ticket sales from taxation.
Legislative staff estimated that the ticket sales tax exemption that the governor signed this year could cost the state up to $2.5 million in lost revenue.
On the other hand, there would be no sales of world cup soccer tickets to tax unless the state attracted the World Cup to Kansas City that would generate extra income for city and state businesses.
But Missouri has a long history of offering financial incentives to businesses to encourage Missouri development that went nowhere. Just think of the government funds spent for the St. Louis football dome which the Rams abandoned.
Covering that stadium issue for KMOX, I remembered the late Howard Cosell of Monday Night Football admonishing major league football teams for blackmailing cities to finance their stadium improvement demands under threat of leaving town.
On the other side is the promise that these various business and financial interests contribute large amounts to political candidates seeking tax cuts in the name of economic development.
But profit-making corporations are not the only players in these food fights. Local governments seek expanded powers to ask local voters to raise taxes for services to promote their local business tourism operations and public safety.
Other tax cut proposals are targeted to benefit those with moderate or lower incomes.
There is a trade-off to these tax cuts.
Any cut in state taxes can lead to less revenue for services like education.
The legislature’s proposal to lower income taxes if there is a significant increase in tax collection revenue from the prior year provides a perfect example.
During times of high inflation, like the current period, sales tax collections increase because of the higher cost of sales upon which the state sales tax is based.
But compounding that issue is the degree to which the higher cost of products also increases costs for state agencies for purchases.
So a tax cut in an era of high inflation creates a double whammy for services like education, which could end up with less state government funding but will face higher costs because of inflation.
Legislative staff estimated the legislature’s proposal for phased-in cuts to the state income tax based on increased collections ultimately could cost tax collections for state services of nearly $2 billion dollars in lost revenue during a five-year phase-in of the cuts.
On the other side, however, the legislature’s “fiscal note” does not estimate what supporters argue could be a stimulus to the economy from lower taxes that could expand the state’s economy and purchases.
That has been the heart of these tax cut proposals I’ve heard over the decades covering both Congress and Missouri’s General Assembly that tax cuts can stimulate the economy to offset tax cuts.
Republicans during President Ronald Reagan’s administration used that “trickle down economy” argument to justify federal tax cuts.
(Phill Brooks has been a Missouri statehouse reporter since 1970. He is the statehouse correspondent for KMOX Radio, director of Missouri Digital News and an emeritus faculty member of the Missouri School of Journalism. He has covered every governor since the late Warren Hearnes).