Taxpayers Research Institute of Missouri releases reality-based study on tax cut bill
If the veto of House Bill 253 is overridden, the state of Missouri would likely lose only $50 million of the state’s surplus of $339 million in Fiscal Year 2014 according to research published Tuesday by the Taxpayers Research Institute of Missouri (TRIM).
That amount comes from a $45 million reduction in personal income tax and a $4.97 million reduction from the bill’s corporate income tax reduction. The figures were generated assuming that Congress will not pass the federal Marketplace Fairness Act which is currently languishing in the U.S. House of Representatives.
The study also finds that if the Marketplace Fairness Act is enacted during the current tax year, the impact will be a $201 million reduction of the $339 million surplus in state revenues.
The report uses information published by the Missouri Department of Revenue, Kansas Department of Revenue, U.S. Department of Labor, Office of Administration of the State of Missouri, the Economic Policy and Research Center of the University of Missouri, and other reliable sources.
Veto supporters continue to quote figures of revenue loss based upon a belief that the Marketplace Fairness Act will pass Congress, and that Missouri taxpayers will then be allowed to seek refunds for three tax years previous to 2014.
TRIM maintains such retroactive refunds would be unconstitutional, and sites examples from legislation passed in 1990 and 2012 where specific provisions for retroactive tax legislation were halted by the Department of Revenue due to constitutional concerns.
“The numbers being used on the other side of this debate simply don’t add up,” said TRIM executive director Ray McCarty. “They are using a worst-case scenario times three – and an unconstitutional scenario at that.”
Continuing on with the analysis, TRIM estimates that at the end of the five year cycle of reductions in the business income tax, and the increased personal exemption for taxpayers making less than $20,000 a year, the cost to the state would be $184.6 million.
When figuring in the individual income tax rate cut, and the corporate income tax reduction after their ten step reduction, the report shows, without the Marketplace Fairness Act, state revenues would be reduced by $673.7 million, with the Marketplace Fairness Act: $1.0147 billion.
But by the time those reductions are in place, under the phase-in provisions in House Bill 253, the state will have taken in more than $1 billion in increased revenues, and probably much more.
The report does not attempt to figure an amount for increased personal income tax revenues brought about by businesses hiring more workers and paying more in salaries to current employees. Nor does it account for increased revenues from businesses moving to the state, or staying in the state and expanding due to the tax cuts in House Bill 253.
Nor does it figure increased revenues brought in under the streamlined sales tax collection on internet sales which is part of the legislation.
“While we cannot accurately estimate the amount of revenues this tax cut will generate, we do know there will be a cost to state revenues if no action is taken,” said Ray McCarty. “The state will lose revenues when businesses leave Missouri for bordering states that have more business-friendly tax policies.”
In the report, TRIM cites data published by the Bureau of Labor Statistics that ten states with a lower top corporation income tax rate than Missouri had higher job growth figures than Missouri between June of 2012 and June of 2013. Also, four states had a higher percentage of job growth, lower top corporation income tax rates and individual income tax rates, and lower unemployment rates than Missouri.
“32 years ago today, President Reagan signed into law the first in a series of tax cuts that resulted in increased economic growth, increased personal income and lower inflation, unemployment and interest rates,” said McCarty. “Tax cuts in recovering economies work. The tax cuts in House Bill 253 will work for all Missourians by returning some of the growth in tax revenues to the taxpayers that originally paid the taxes.”
A link to TRIM’s report is here. Additional hard copies are available upon request. Ray McCarty will be available to take media questions over the phone or in person in Jefferson City. Contact Dick Aldrich, (573) 634-2246 or (573) 301-4050 to set up an interview.