The legislature is on spring break. Lawmakers are away from the pressure cooker that is the legislative session. But they’ll be back next Monday and the state’s financial problems will be one week worse.
State government is in a tight financial spot and that means more hurtful budget cuts are coming. Sure, economic indicators have shown some slow upturns but not as much as was anticipated when the Governor’s budget people and the legislature’s budget people tried to forecast how much tax money would come in to finance state operations. That means more cuts for the fiscal year ending June 30th. That means scrapping much of the Governor’s proposed budget for fiscal 2010-2011, which starts July 1.
There is an alternative: finding some new revenue. That’s political-speak for “tax increase.”
But there is no serious discussion of such a thing. The philosophy of the legislature and the Governor is expressed in three words: “no tax increases.” Advocating tax increases on anybody when the jobless rate is in the 9-10% range and the income and sales tax figures indicate people aren’t making money, aren’t buying things, and aren’t paying taxes is, candidly, a fool’s errand. It takes outrageous courage in an election year for any lawmaker facing voters to even whisper the euphemism, “revenue enhancement.”
How heavily are Missourians taxed?
We went to The Tax Foundation, a national organization that studies state tax burdens on citizens, to see where Missouri ranks. This group calculates “Tax Freedom Day,” a system that determines how many days in any year that citizens have to work to earn enough to pay all of their various federal, state, and local taxes during a year. The foundation says that Missouri taxpayers had to work the equivalent of 96 days in 2009 (April 6) to pay their total tax bill. Missourians worked a week less than the national average. Missouri ranked 34th among the 50 states in the number of days needed to pay all of the taxes they pay.
Here are some other numbers from the Tax Foundation showing where Missourians rank nationally in various tax categories:
- Total State/local tax burden 32nd (an estimated 9.2% of our income goes for state and local taxes. National average: 9.7%)
- 2010 Business Tax Climate 16th (the foundation bases this on five business taxes)
- Individual Income Tax: Our top state rate of 6% ranks us 21st.
- Our average individual state income tax payment of $829 per person in 2006 ranked us 27th.
- Corporate Income Tax: Our top rate of 6.25% ranks us 34th.
- Per capita corporate tax collections $67, ranking us 46th.
- Sales, Gasoline, and Cigarette Taxes: Our state sales tax of 4.225% is below the national median of 6%.
- State and local governments in 2006 collected $849 per person in sales taxes, ranking us 25th.
- Gasoline tax of 17.3 cents per gallon–44th.
- Cigarette tax of 17 cents per pack–49th.
- Property taxes: We are one of 37 states collecting state and local proerpty taxes. Combined total of $857.52 per capita ranks us 36th.
Federal tax burden and expenditures. In 2004, the latest year the foundation has figures for, Missouri got $1.29 for each dollar its citizens sent to Washington.
There are other taxes and fees not included in the foundation report–casino taxes for example, and locally-approved special sales taxes.
So is there a good time for tax increases? Are there good places to increase taxes? The Tax Foundation’s rankings indicate there are places where increases could be made that would still leave us in the lower rank of states while improving support of programs and services.
But how often have you heard anybody say they’d be willing to pay a little more in taxes to get better services or to avoid cuts to programs?
The long-prevailing view at the Capitol is that the state has to live within its means and any tax increases will kill jobs.
Tax policy is a complicated, unpopular, and personal issue. Figuring out the best, fairest system is a never-ending quest for our Senators and Representatives. This time, the focus is on whether to eliminate the income tax and replace it with a higher sales tax that presumably would not increase the amount of money the state would get for the things the taxpayers have indicated they want to have provided to them. That situation is called “revenue neutral” at the Capitol. Buit lawmakers receive missives from hundreds of groups each year saying “revenue neutral” is not what their cause needs. They need “spending plus.”
The focus in recent years has been on helping business with various forms of tax reduction or tax deferment. The idea is that those programs will encourage business growth which will create more jobs which will create more income which will create more income taxes which will allow state programs to keep up with increased costs of living. There is much dispute for many years about the validity of this approach but no conclusions have been agreed upon enough to lead to action.
Can the FAIR Tax ride to the rescue? Look for debate in the last half of the session on replacing the state income tax with higher sales taxes although several legislative leaders don’t think it will pass. If you’re looking for some cheap entertainment, watch the scramble among various interests to be exempt from charging the higher sales tax. Should food be exempt from sales taxes under the new system? Prescription drugs? Cars? Services of podiatrists, lawyers, cable television installers, fortune tellers? And what will this proposal do to all of the tax incentive programs given businesses to create jobs? Most observers think it will wipe them out.
What do to? What do to?
Peggy Lee’s hit song in the early 50s called “Manana” (you pronounce it Man-yahn-a, a Mexican pronunciation) comes to mind. The character in the song bemoans his circumstances but decides they’ll go away tomorrow, or Manana. We don’t hear the song much today. Some people would find it demeaning because it was sung in a faux Mexican accent and portrayed the song’s character as lazy. But if you’re old enough or if you’re a music trivia buff, you’ll remember one of the verses:
The window she is broken and the rain is comin’ in.
If someone doesn’t fix it I’ll be soaking in my skin.
But if we wait a day or two the rain may go away.
And we don’t need a window on such a sunny day.
And the chorus goes:
Manana is soon enough for me.
Let’s see what tomorrow brings. Let’s see if somebody finds a way to afford a new window. But new windows aren’t free.