Last week, the Missouri legislature cut something that had only seen growth in over a century. Don’t worry, the Irish Tenors are still showing. Rather, the state House and Senate overruled Governor Jay Nixon’s veto of income-tax breaks for Missourians. The most notable of these cuts is a .5 percent incremental decrease for the top marginal bracket and a 25 percent tax income-tax exemption for small businesses.
The Show Me State joins its neighbors in Oklahoma, Kansas and Indiana (among others) in what the Wall Street Journal calls “The Heartland Tax Rebellion” as states boasting income-tax reform plans that have showed seemingly positive results at both the individual and state levels. Of course, these types of policies cross at the intersection of conservative and liberal ideologies, which has led to significant backfire from the Democratic Nixon and his legislative minorities.
The argument is predictable and even older than Missouri’s last tax cut. Nixon and his cohorts say the policy will take away from funding for other public services, namely education. On the other hand, Republicans advocate for their policy by saying that it puts more money in the pockets of individuals, thereby stimulating economic growth and job opportunities making Missouri more competitive with the other Heartland Rebels. Both sides look to other states with similar statutes to make their point, with Democrats showing the seemingly detrimental effects of Nevada and Florida’s policies and Republicans using Kansas and North Dakota’s as touchstones. However, both sides’ examples only demonstrate a facet of what comprises a state’s economic situation.
Therein lies the issue with these types of ideological bouts. No two states are the same. The whole reason the backbone of our government rests in the power of states is because they are dynamic. People reside in a certain state for a myriad of reasons: jobs, family, climate, tax incentives, etc. With something as complex as tax reform, and cuts in particular, each state must take into account its own demographic and customize the solution to the lives of their citizens. While studies indicate states with lower income-tax levels show better performance over time in employment, population, and state production, Missouri Republicans must be careful to not merely copy and paste methods that have worked in Kansas and Oklahoma. Rather, careful measurement and calculation is necessary in order to tailor this policy in a way that is mutually beneficial for individual prosperity and state growth.
For more information on Missouri’s journey towards comprehensive tax reform, check out this video from the Show-Me Institute