Missing the Big Picture

Missouri's tax system needs an overhaul, not a holiday

The Missouri General Assembly is coming off its most productive week of the session -- spring recess -- and now it's back to the weighty business of doing little or nothing to the people of the state.

This year, there's an eerie election-year silence from Jefferson City, especially on such perennial wedge issues as abortion and guns. This makes for an unusually boring legislative season -- which is saying something -- but you still can't be sure that some Rich Chrismer or Steve Ehlmann won't land on the planet with a really stupid idea at the last minute.

Journalists can only hope. In the meantime, the small tribe of inhabitants who follow the machinations of their state government may have to make do with not watching sports monopolists receive hundreds of millions in stealth tax breaks (a topic covered here enough already).

That said, we turn our lonely eyes to a New Age notion known as a "tax holiday." A bill introduced by state Sen. Ken Jacob (D-Columbia) would make Missouri a sales-tax-free zone for purchases of clothing and footwear under $100 from precisely 12:01 a.m. Aug. 12 through precisely midnight Aug. 20.

You've got to love the drama of these precise times, with the sense of drama and urgency they impart, and the idea should be gimmicky enough to merit an occasional sound bite, if it lives to see the end of the session in May. New York tried the idea in 1997, followed by Florida in 1998 and Texas last year, and retailers liked it so much that the National Retail Federation is mounting a nationwide push for the idea.

If state legislators feel compelled to play Santa Claus in this even-numbered year, the funky notion of manufacturing a week of Christmas shopping in August is at least, well, funky. To be fair to Jacob (one of the best and brightest in the Capitol), the state has done worse.

If the bill would do nothing more than allow the purchasers of nonluxury items under $100 to save a fistful of dollars here and there on a one-time basis, it would be less unjust than the income-tax-refund mechanisms of the dreaded Hancock Amendment, which disproportionately helps those who need help the least. Backers of the tax holiday can also make the point that the giveaway doesn't have the perennial effect of Hancock or a cut in tax rates.

But when they trot out the economic-benefit-analysis charts, presuming that the long lines and holidaylike buzz at the malls will provide some gigantic boost to the state economy, it begs some commonsense questions.

What about the weeks before and after this exciting holiday? Aren't folks going to be purchasing fewer items of clothing and footwear during those shopping days than they would without the tax holiday?

Will we really be a people wearing more pairs of jeans and socks? Are we sure that the net sales-tax savings will be recycled solely in the Missouri economy and not on vacation trips, forays to Illinois and other foreign purposes?

And what about the lost tax revenues from purchases by out-of-state visitors during a third of the heavy tourist month of August? It's not a huge revenue loss -- just the salary of a teacher here, a corrections officer there, right?


It's a bad idea for the state to give away any of the estimated $6.4 million of its own revenue and a couple million from local governments (which, by the way, can't love having their treasuries spontaneously depleted in this fashion). This is poor timing because of the overcrowded prisons, weakly supported educational system and scantily funded social-service deficiencies to which state residents seem oblivious.

The bottom line is that a tax cut is, conversely, a spending cut. And this happens to be a government that already undertaxes and underspends.

Undertaxes? There's a concept you don't come across every day.

Then again, boring issues don't send one to the Web site of the U.S. Census Bureau every day.

There, under the new section "State Government Tax Collections: 1998," one can see how all the states compare in the collection of revenues, taxes and other sources. It offers a big picture the politicians seldom consider.

The average state collects $1,760 per capita for its government. Missouri collects just $1,511 per capita, a whopping 14 percent less than the national average. Only 11 of the other 49 states take in less revenue per person.

Even more revealing is how revenue sources break down. Missourians actually pay 3.7 percent more personal state-income-tax dollars per capita than the average American, and sales-tax revenues -- the source that would be reduced by a tax holiday -- are already 16.5 percent lower than the national norm.

That may explain why Missourians don't feel the benefit of living in a low-revenue state -- it doesn't seem so low on April 15 -- and it also suggests that sales-tax refunds shouldn't be a logical priority. If anything, the overall snapshot argues for more funding of state services, not less, and the Census Bureau statistics are enlightening.

Want to find a place to raise revenues? Try this: Missouri's net corporate-income-tax receipts, per capita, are an astounding 43 percent lower than the national average. If the state simply collected this source at a rate equal to the national norm, it would add $269 million annually to the underfunded state treasury.

That's right. Just equaling the national average in per capita net corporate-income-tax collections would add more than a quarter-billion dollars to state government. That's two months of sales-tax holidays.

Obviously, raising rates by 43 percent overnight would send some companies scurrying overnight, but it's not clear that phasing in increases to bring the state's corporate community up to a fairer share -- on the basis of national numbers -- is not an achievable goal. At least the idea should be on the table.

Now if someone could show that Missouri's tax-friendly status has been a magnet for some stunning influx of new and expanding industry, it would follow that lower corporate taxes paid off in thousands of jobs and thus a booming economy. Nice theory, but who's buying it?

Where are all these companies?

The numbers don't translate into eternal truths, and it can't be assumed that hitting the national norm is a utopian ideal. But don't you think the legislators ought to have a look around the country before flinging millions of tax cuts on a lark? And shouldn't they be looking at the big picture?

Imagine a day in Jefferson City on which legislators ignored their corporate benefactors and restructured the tax code to bring companies' contribution up to the national average. You know what the average citizen could call that day?

A real tax holiday.

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