The ruckus over the State Auditor’s fiscal note is amusing to watch. The opponents of tax reform are crying foul that the state auditor rightfully identified their Henny Penny claims of devastation or bankruptcy as bogus. This doesn’t sit well with those opponents as they reject and ignore anything that doesn’t support their position as demonstrated by the fact that Tennesee doesn’t even exist in their minds or analyses! The audacity of the auditor not to agree with their faulty techniques and analyses.
As budget chair, I chaired the fiscal note review committee. In addition, I also chaired the Joint Committee on Legislative Research and Oversight where fiscal note challenges were heard. I can tell you the auditor’s response to the fiscal note inputs from the departments was solidly in keeping with the way fiscal notes are to be done. The process is to consider the inputs, weigh them for biases and accuracy and then use appropriate outcomes. That’s what happened here.
Take, for example, the fiscal note input from the office of Budget and Planning (B&P). I have a lot of experience with B&P estimates from the aforementioned positions and have found that they are often off base. It’s not because they are bad people. Linda Luebbering and her staff are fine folks. The problem is that their estimates are from an inside government approach, more or less designed to defend the status quo.
The fiscal note analysis for the initiative petitions by B&P apply the same approach used when I was budget chair for Consensus Revenue Estimates(CRE). Those are the same ones that resulted in faulty estimates by B&P when I was budget chair causing unnecessary withholdings by the governor and local tax increases being placed on the ballot. I never agreed to one of the CRE’s as budget chair as they could not be depended upon.
The last year I was chairman, I hired an outside economist who did an in-depth analysis of Missouri revenues and we developed a revenue estimate that we used to develop the state budget. B&P and the governor didn’t agree and, in fact, estimated that the revenues would be significantly less. When the dust settled, turns out that our estimate was .02% off and B&P’s was almost 6%.
As I look at the B&P fiscal note analysis, I see many of the same old way of estimating being applied. For example,
- They misinterpret the fact that the initiative petitions eliminate all sales taxes, state and local. They don’t.
- They use revenue sources that they say have to be replaced that don’t. Case in point is the MoDOT sales tax revenues from new car sales. Not only will MoDOT receive the sales tax from new car sales, contrary to B&P and MoDOT’s misinterpretation, but by MoDOT’s own estimate last year they will be collecting more money in 3 years than before this proposed reform.
- They falsely claim the Show-Me Institute says the rate would have to be 10-12%. They didn’t. If B&P had read all the literature regarding the study, they would have found that it was not based on any of the initiatives but rather based on a fictional model economy. It didn’t even use Missouri data.
- They use a questionable data source for their baseline basket of goods resulting in a base that is much too low. The baseline estimate is 20% or more off.
- They include other analyses purported to have been performed on the initiatives, which were not. They did once again prove the old adage, “garbage in garbage out.”
Perhaps the most glaring shortcoming of the B&P analysis is that they totally ignore the real life model that exists in Tennessee. Rather than analyzing the fact that Tennessee has been using the same basic model as proposed in the initiatives, they ignore the best information available to them.
The initiatives do propose a broader base than that taxed in Tennessee. The reality is that we know Tennessee collects over $6.1 billion on a narrower base than that being proposed. This would account for at least 75-80% of the tax collections needed to replace existing revenues.
Services play an important role in the proposed initiatives and are often the target of opponents. I find it interesting that according to the Federation of Tax Administrators website, Tennessee actually taxes more services than Missouri does (84 versus 38). The proposed initiatives build on a proven concept, expanding a solid collection base to finish out the collection of more revenues.
So, when you hear “this has never been tried before anywhere else,” just remember that is a false statement! The baseline has been applied in real life for a long period of time and is proven. Missourians will be better off with the proposed tax reform.
So, if your initiate doesn’t in the end lower State and local sales taxes, what’s the point? This smacks of changing the game to get more revenue from the working man. Is it really needed because less are working and thus less are paying into the income tax and more are recipients?
If the Federal passes a fair tax at say a 20% rate and State is 7% and city and county equal say 5%, then we will be paying a whopping 32% on EVERYTHING including utilities, food, fuel, water, as well as cars, etc. Once we go to a sales tax, the government will find a way to tax us on the air we breathe.
I hate the current income tax, but you need to come up with something better to replace it with, something that is LESS of a burden on the working class and industry.
The initiatives provide for local votes to lower local rates if the local government wishes to lower their rates. It is true the initiatives don’t require local governments to do so but if they don’t, other local government entities will and they will be at a competitive disadvantage. HJR8 requires that the local governments roll their rates back.
The same isntrue of border areas. They will be competitive with the neighboring states if the local governments will broaden their base and lower the rate.
Not everything you mention such as fuel would be subject to the state sales tax. Tennessee already does this and has successfully done so for well over 60 years. The working man and the poor have not suffered and in fact, do better in Tennessee than in Missouri.
Thanks for your response Carl. I agree with the concept of a flat type tax replacing the income tax, but not if it INCREASES revenue to the state. The point is that taxes need to be reduced not increased. And the recipients need to be weaned off of the public trough altogether.
Up to this point, our State and Federal elected officials have shown a complete absence of accountability and lately, an insane refusal to respond to the wishes of the people.
Fixing our government, and it’s mostly worthless programs, is always just around the corner if we spend yet more money. So you must forgive me and most everyone else I know if we’re just a little (actually a lot) suspicious of yet another way of sucking money of the ones still working and giving it to the ones contributing nothing.
That’s the part that needs to change. The State is broke, correct? It has more money going out than coming in, correct?
Getting rid of the income tax would be a good thing, but would only help if the tax couldn’t be raised without a vote of the people. If the judges or our representatives get their hands on it we’re screwed yet again.
Thanks for your feedback Randy.
The measures are designed to be revenue neutral and not provide a windfall to the state or local governments. The model will result in growth but not a windfall.
The tax could not be raised either on the state or local level without a vote of the people.