In spite of a string of winter weather that left much of the Show-Me State under ice and snow, the Missouri Senate worked through the night on Tuesday and into Wednesday morning debating a measure (SB 120) addressing tax credits.  I respect the value of your tax dollars, and I want Missouri’s tax policies to encourage prosperity, rather than dependency. Manipulating a project’s economics with special interest tax policy works against economic prosperity by providing incentives to investors to spend money on projects that will have a lower return on investment. Tax credits may not even be constitutional. Is it really the role of government to provide incentives at the expense of taxpayers’ wallets?

It’s no secret that we have seen tax credit redemptions skyrocket in our state. The Missouri Department of Revenue reported last year that Missouri spent a record $629 million on tax credit redemptions in Fiscal Year 2012. Often times, not enough thought is given to the consequences of using public dollars and the negative impact it has on Missouri families. At a time when our state’s operating budget is tight and the livelihood of critical state services — such as education and transportation — are in question, we should not be wasting funding on subpar tax credit programs.

One solution to the problems with tax credits is to stop taxing income and, instead, tax consumption. If that change is implemented, most tax credits would disappear, because most are credits against income tax liabilities. The income tax was introduced with the 16th Amendment to the U.S. Constitution, which gave Congress the power to lay and collect taxes on incomes. America’s founders had recognized the income tax as a threat to liberty and banned it in the U.S. Constitution.

An essay by Frank Chodorov explains the flaws of income tax perfectly: “The Constitution, then, kept the federal government off balance and weak. And a weak government is the corollary of a strong people. The 16th Amendment changed all that. In the first place, by enabling the federal government to put its hands into the pockets and pay envelopes of the people, it drew their allegiance away from their local governments. It made them citizens of the United States, rather than of their respective states. Theft loyalty followed theft money, which was now taken from them not by their local representatives, over whom they had some control, but by the representatives of the other 47 states. They became subject to the will of the central government, and their state of subjection was emphasized by every increase in the income tax levies.”

A study conducted by the American Legislative Exchange Council in 2012 highlights the differences between the nine states in our country with no personal income tax and the nine states with the highest marginal personal income tax rates. With regard to growing gross state product, the states with no personal income tax have, on average, outperformed the other said states by 39.2 percent. Another study, conducted by the Maine Heritage Policy Center, notes that the state of Maine, which has a top marginal income tax rate of 8.5 percent as of 2012, lost more than 11,400 residents, $661,274,000 in income, and $87,004,000 in taxes, from 1995 to 2009. Researchers found that much of the migration out of Maine went to states without an income tax.

Even though SB 120 adds tax credits, I voted for the bill, because, if passed in its current form, it will still shrink Missouri’s tax credit program. Too often in government, when the train is heading off the cliff, we run to the caboose, instead of solving the problem by stopping the train. Missouri should abandon the tax credits that empower politicians to pick winners and losers, and, instead, empower the people by real tax reform that puts power in the hands of consumers.

I appreciate you reading this legislative report, and please don’t hesitate to contact my office at (573) 751-2108 if you have any questions. Thank you and God bless.