Jay Nixon’s petulant veto.
The new law is designed to gradually reduce Missouri’s top individual income tax rate — currently charged on all income over $9,000 — from 6 percent to 5.5 percent. It also phases in a new 25 percent deduction for business income reported on personal tax returns. Each incremental cut would occur only if state revenues grow by at least $150 million over their high mark from the previous three years.
Jay Nixon’s hysterical, screaming veto.
Economists at the University of Missouri-Columbia have estimated that the tax cut will eventually reduce state revenues by $620 million annually. But Nixon asserted it could punch a $4.8 billion annual hole in the state budget. He contends the bill’s wording could be interpreted to eliminate taxes on all income over $9,000, though Republican legislative leaders have called that “absurd.”
If you’ve ever wondered what a politician looks like when the legislative equivalent of a heroin withdrawal program is implemented, take a good gander at Governor Nixon over there. He’s been chasing that particular dragon for quite a while, it looks like – and it looks like ol’ Jay thinks that Daddy still needs his fiscal medicine. [sigh] Don’t do taxes, kids. Sure, it’s a great high, but you end up needing more and more to get the same effect, and it’s never as good as the first time…
Moe Lane
“Economists at the University of Missouri-Columbia have estimated that the tax cut will eventually reduce state revenues by $620 million annually.”
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Well, yeah. Isn’t that the point?
Actually .. no. No, it isn’t.
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Keyword: Laffer Curve.
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Mew
I understand the Laffer Curve. But if you can cut $620 Million from state government, that will be… *pulls out a calculator and punches a few numbers* …$620 Million in the hands of the good people of Missoruri. I call that a win any day of the week.
From Moe’s pull-piece:
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“Each incremental cut would occur only if state revenues grow by at least $150 million over their high mark from the previous three years.”
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So .. in order for the cuts to happen, state revenues have to grow. Right?
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Mew
Yes, but that’s probably going to happen anyway due to inflation and/or the economy getting out of purgatory. Which has a decent chance of happening since there’s almost no way any major new bad for business stuff can come down from Washington with a GOP congress and Obama still in office.
However, it does rather prove that Nixon’s objection is bullshit since, if neither of those things happen, the cuts won’t happen either, eh?
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Mew
“So …in order for the cuts to happen, state revenues have to grow. Right?”
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I didn’t noticed that part. If that’s the case, that’s super dumb. Just cut taxes and be done with it.
I agree, Gator, just cutting taxes would make more sense.
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That said, if it’s stupid but it works ..
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Mew
Only follows if you’re on the right side of the laffer curve. Tax rates of 5-6% are very unlikely to be so.
As Missouri is not one of the States that *doesn’t* have an income tax *and* a property tax *and* a sales tax, your 5-6% number is a portion of the picture.
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Look at the *total* taxation of citizenry, eh?
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Mew
Still doesn’t change anything, most evidence points to the peak of the Laffer curve being somewhere slightly north of 50%. The average total tax rate for Missouri is unlikely to be anywhere near that. So the tax cuts will be revenue positive for the tiny portion of the population that’s above that, and revenue negative for the vast majority of everyone else.
Which is not a bad thing. We want to be shrinking the size of government, starving the beast whenever we can.
Umm.. did we read the same pull paragraphs above?
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Unless revenue increases – admittedly, Dave R (above) has better reasons than just Laffer why that may happen – there are no cuts.
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We agree on starving the beast. This, however, looks like a “slower rate of increase” bill, so “putting the beast on a diet”.
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Politics being the art of the possible, I suppose it’ll do for now.
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Mew
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p.s. regarding Laffer, the theory seems to require looking at *total* taxation, not just any one group .. so, you must include the MO income, property, sales, and gas (if separate from sales) taxes, as well as Federal taxes on top of those to determine where you’re at. Who knows, MO may be one of the few States where we’re *not* above the optimal point.