No ‘Kansas’ type of tax reform

In the 2018 legislative session, which ended last May, one of the bills debated was HB2540. This started off as a massive tax reform bill, encompassing income tax, sales tax, internet tax, property tax, vehicle license fees, and more.

The initial printing of HB2540 was over an inch thick, double sided. At the time, I spoke to a group of constituents and said I thought the bill was simply too big to pass.

Most legislators that I work with would be reluctant to vote for a bill that they had not read and understood, and while HB2540 did have some good components, a bill the size of its original draft was simply too bulky to be digested by most members with our workload.

As HB2540 worked its way through the process, it was trimmed and simplified until the final product was about the size of a pamphlet, and dealt strictly with personal income tax. The idea was to eliminate some exemptions and close some loopholes in the tax code, which would allow state income tax rates for Missourians to be lowered without negatively affecting the state’s budget.

This bill would piggyback on the federal income tax cut that was passed at the end of 2017.

In its final version, HB2540 used money obtained by reducing federal tax write-offs to lower income tax rates from the 6.0% they were in 2017 to 5.5%.

Additionally, if our economy shows strong growth and government tax revenues increase, that windfall will be shared back to the Missourians that earned it by incrementally inching rates down to 5.1%.

Missourians should soon notice less taxes being deducted from their paychecks, which essentially acts as a pay raise.

Critics of HB2540 have pointed out that Kansas recently had a tax cut experiment that failed, and therefore all plans that lower income taxes will fail. The difference is that the Kansas government lowered their taxes without lowering their spending, and then crossed their fingers and hoped that the Kansas economy would flourish. When that didn’t pan out, they were in a financial bind and had to reverse some of their cuts.

Other states have learned from Kansas’ mistakes to create better tax reforms.

Missouri’s plan to offset the lower rates by closing loopholes in the tax code should create a breakeven in government revenues, with future growth coming from being a more financially attractive state in which to live and conduct business. And any future lowering of rates is smartly only triggered by this future economic growth.

On July 12, Gov. Parson signed HB2540 into law at a ceremony in Springfield. Present were the House and Senate handlers of the bill (Rep. Haahr and Sen. Eigel), myself, and several area legislators. While HB2540 was not my bill, as vice-chairman of the House Ways & Means committee, I did have some input into streamlining it and correcting some of its original flaws.

It was an honor to receive a signed copy of the bill from the governor, and to be a part of bettering the lives of my fellow Missourians.