As we begin the new year of 2011, we do so with a great deal of anticipation. 2009 and 2010 were, by and large, bad years for Americans as their government grew by leaps and bounds with nothing to show for it except tons of debt that our grandchildren and great grandchildren will be paying off. The extension of government laws and regulations into areas the government has no business or constitutional authority to go, coupled with the tremendous expansion of our national debt, led to real “hope and change” being made in the November 2010 elections. Now the challenge will be for Republicans to not just talk the talk but walk the walk!
The increased burden placed on us by the federal government, and some bad spending decisions, are having an impact on Missouri. The Republican-controlled legislature and Democrat governor made some bad decisions in spending the borrowed Chinese stimulus money in the past two years. These bad decisions, coupled with budget-busting pension systems put in place over the years, has put the Missouri budget in a precarious position. The saving grace is that Missouri has a balanced budget requirement — something that should be required on the national level as well. While it keeps the “damage” somewhat contained, it doesn’t keep the chickens from coming home to roost.
You don’t have to be the former chairman of the Missouri House Budget Committee to see that the budget picture for Missouri is challenging. There is no doubt that additional cuts will have to be and should be made. Entitlement programs and out-of-control, underfunded retirement plans will have a huge impact on Missouri’s fiscal position for many years to come. These demands on the precious tax dollars compete with items such as education and transportation. It is unfortunate that it takes a drop in revenue to make government reconsider its spending decisions. But without that drop, governments, regardless of the party in power, would not do so. That has to change.
The clamor to raise taxes, especially cigarette taxes, is already being heard in the left leaning editorial rooms across the state. Seems that being the lowest tobacco tax in the nation is considered a sin. For the record — it isn’t!
But whether it’s the clamor to raise the tobacco tax or the job-killing proposal to raise the income tax by a billion dollars, all the “fixes” miss the point that the issue is, indeed, a structural problem. It’s not a as simple as saying “it’s a lack of revenue” that’s the problem. In reality, it is the failure to rein in spending, which is dependent on a highly volatile tax revenue stream based on income, that discourages productivity and investment.
Contrary to what anyone on the left or right may say, there is no one solution, no silver bullet remedy to the nation’s or state’s fiscal problems. It will take a combination of solutions to address these fiscal issues.
As we have witnessed recently, the states with the best and lower tax positions grew in the last decade. While Missouri is a so-called low-tax state, we failed to grow as robustly as those with better tax positions. The result is we will have less representation in Congress while those with better and lower tax policies will have more!
The Missouri Jobs and Prosperity Act (MJPA) is one key solution that should be presented to voters of the state. The MJPA is a well-researched and workable solution to provide a more stable revenue source for the state. It phases out the current income tax system and replaces it with a consumer driven sales tax. The ups and downs that come with recessions and economic downturns will be far less significant and impactful than they are now with the severe dependence on income tax collections.
We don’t have to look beyond our neighboring state of Tennessee to see that the basics of the MJPA work and work well. Tennessee attempted to implement an income tax in the late 1940s but its Supreme Court threw it out. Since then, Tennessee has learned to subsist primarily on sales and excise taxes. For the longest time, Tennessee lagged Missouri’s gross state product (GSP) which is a measure of how well individuals are doing in a given state.
Unfortunately, Tennessee passed Missouri up about 10 years ago and now enjoys a higher GSP than we do. Projections are that if the current trends hold, the average GSP in Tennessee will be approximately $40,000 higher than in Missouri over the next generation. It doesn’t have to be that way.
Missouri has the opportunity to improve on what has happened in Tennessee and other states. We can and and must develop a tax reform proposal that is robust, placing us at the forefront of economic and population growth, not as an also-ran. Kansas is already considering a similar approach to the MJPA, and there is strong interest in Oklahoma as well. As in most races, the best prize goes to the one who crosses the finish line first. Those coming in second and third receive diminished rewards. It will work that way in tax reform as well.
In the coming months, Missourians will be provided with much information about the MJPA and debunking of the opponents’ claims that it is untested and won’t work. Missourians should have the opportunity presented to them in 2012 to decide whether the status quo is acceptable or whether Missouri should move into the 21st century with a vibrant economy becoming the economic engine of the Midwest.