Missouri Tax Cut Proposal Resembles Kansas' Path, With A Few Key Exceptions | KCUR

Missouri Tax Cut Proposal Resembles Kansas' Path, With A Few Key Exceptions

Jan 30, 2018

This week, Missouri Gov. Eric Greitens introduced what he considers to be "the boldest state tax reform in the nation," looking to reduce the income and corporate tax rates, among other things.

The Republican may have learned a thing or two in putting together his plan from almost-former Gov. Sam Brownback in neighboring Kansas, where legislators almost completely rolled back the aggressive 2012 tax cuts that left Kansas cash-strapped.

KCUR's Kyle Palmer spoke with fellow reporter Jim McLean, who covers the Kansas Statehouse, to break down where the proposed Missouri plan intersects and differs from the Kansas tax experiement. 

You have reviewed Gov. Eric Greitens' plan, and we should emphasize, again, this is still just prospective at this point, but what do you see in his plan that mirrors what happened in Kansas?

They're both significant, if not substantial, tax cut plans based on the premise that cutting income taxes in particular then will spur economic growth. But there are also some ways that they're not all that similar.

Greitens is calling for a substantial cut in the top rate from 5.9 to 5.3 percent. Kansas cut its top rate from 6.45 to 4.9 percent. Greitens is also talking about reducing corporate income taxes; Kansas, as you know, eliminated taxes on pass-through business income entirely (for more than 330,000 farmers and business owners, according to the Associated Press).

It appears Gov. Greitens is attempting to ensure that there are at least some pay-fors (ways to pay for the cuts) in his bill. He wants to eliminate a 2 percent business discount for businesses when they pay their taxes on time. And he also wants to limit the tax deductions that people take for federal taxes. So, he's claiming this will be budget-neutral. Gov. Brownback made similar claims, but a lot of the pay-fors that Gov. Brownback initially proposed were taken out of the bill before it was passed. And so I think that would be the biggest thing to watch for here ... is what pay-fors are actually in the final bill.

Is it fair to characterize this plan that Gov. Greitens has presented as maybe a little bit more moderate than what was enacted in Kansas in 2012?

From the get-go, it would be fair to make that comparison. Of course, the details will be very important as you move down the road on this, and ... it seems to me from just reading it over and gaining kind of a cursory understand of the Greitens plan, that he has already learned some lessons from Kansas and is attempting not to repeat that history.

You know, our revenues dropped substantially, significantly; they simply plummeted in the first year of the tax cuts after they were enacted. And the state then really never recovered from that. As you remember, Brownback was on what he called a "glide path to zero" — he wanted to totally eliminate income taxes. We never got there, because the revenue loss was so substantial.

And, of course, after many, many years of dealing with budgets that weren't balanced and having to cut state spending just to make ends meet, the legislature last year essentially repealed the Brownback tax cuts.

As Missourians take this tax cut plan in and adjust it, what have Kansas learned over the past five years that you think Missourians should be on the watch for?

I think the most important thing is if you're going to cut taxes, make sure you do something to protect state revenues. The pay-fors, again, will be very, very important.

And then I think this whole notion of the extent (of whether) tax cuts — income tax cuts in particular, but cuts in corporate tax rates — then really spurs as much economic development as proponents would like. ... I think there's an awful lot of research out there and the jury is certainly out on the supply-side theories that tax cuts by themselves really spur growth. Most businesses and the folks who do location work for businesses and corporations will tell you that they look at a lot of things when they're deciding where to plant a business. And the overall standard of living, the quality of the schools, etc., are often just as important as the tax rates.

Kyle Palmer is KCUR's morning newscaster. You can follow him on Twitter

Jim McLean is the managing director of the Kansas News Service, a collaboration of KCUR, Kansas Public Radio, KMUW and High Plains Public Radio covering health, education and politics. You can reach him on Twitter, @jmcleanks