Crunch Time

With just two weeks left in the First Regular Session of the 95^th General Assembly most of the priorities passed by the Missouri House of Representatives remain lingering or stalled in the Missouri Senate.  At this time, the Missouri House of Representatives and the Missouri Senate have Republican majorities.

This session the House has identified a number of priority issues and passed the bills that express the intent of those priorities.  These priorities include:

• Drug testing for recipients of Temporary Assistance for Needy Families (TANF)
• Adjust income tax brackets to give tax relief to middle class
• Eliminate the franchise tax on small businesses
• Expansion of the Castle Doctrine and the Business Premises Safety Act
• Economic development
• Four-day school week
• Prohibit illegal aliens from enrolling in higher education
• Independence Day Sales Tax Holiday
• Declare Missouri sovereignty under the 10^th Amendment
• Judicial reform
• Guarantee the right to pray in public places
• Create the crime of coercing an abortion
• Tax Payer Bill of Rights
• The Fair Tax

These bills have been passed by the House and are now in the Missouri Senate.  With the exception of the economic development bill, none of the other bills have been passed out of Senate committees and are not available for debate by the Missouri Senate, much less have the opportunity for the Missouri Senate to vote on these bills and get them to the Governor’s desk.

This legislative agenda addresses the interests and needs of Missouri families.  This agenda puts Missouri on the path to prosperity from reductions to the state income tax liability for Missouri families, reducing the tax burden of our small businesses, and improving our economic development toolkit to assist qualifying businesses to stay and locate in Missouri preserving and creating family supporting jobs. 

This agenda preserves our constitutional rights relating to public prayer to the protection and preservation of our 2^nd Amendment rights to asserting our state sovereignty under the 10^th Amendment.

The Missouri House believes taxpayers should be protected from the false philanthropy of bureaucrats and politicians with the taxpayer bill of rights and reforming our tax code to reward saving and individual industry while promoting tax simplification through the fair tax.

With two weeks left and the lack movement by the Missouri Senate on these issues time is running out.  Next week will be consumed with finalizing the state budget for the next fiscal year which must be completed by the constitutional deadline of 6pm on Friday, May 8.  After that the General Assembly must adjourn for the year by the constitutional deadline of 6pm on Friday, May 15.

It is now crunch time.  No bill should be considered dead until the gavel falls on May 15, but these bills must be passed out of committee and put on the Senate calendar to have any chance for debate and passage. 

Stimulating Tax Policy

One vexing problem with the state of politics today is the lack of concern for the long-term.  Politicians find themselves more concerned with the short-term to get them past the next election, instead of looking at the long-term for the benefit of the next generation.  Our current economic situation in Missouri and across our great Nation is no exception.

It is troubling when high level staff members begin salivating over an economic crisis to make political gain and fret over the possibility of losing such an opportunity to promote an agenda that is anathema to our uniquely American experience.

The federal government, under administrations from both major political parties has embraced a form economics which, in simple terms, says that governments should spend money that they don’t have and that this spending is the pavement on the road to prosperity.  This brand of Keynesian economics is named after John Maynard Keynes whose economic theory assisted President Franklin D. Roosevelt to prolong what we now know as the Great Depression of the 1930’s.

The federal government has also promoted the Broken Window fallacy as part of its economic policy by promoting what is seen versus what is unseen.  As French economist Frederic Bastiat explained, "There is only one difference between a bad economist and a good one:  The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen."

Keynesian economics combined with the Broken Window fallacy may reap a short-term benefit to some, but it will fail to achieve long-term prosperity for a Nation.

Missouri is expected to receive up to $4 billion from the federal government through the American Recovery and Investment Act of 2009.  Of that $4 billion, approximately $1.2 billion is available without too many strings.  Missouri state government, compared to other states, is weathering this economic downturn.  We don’t need this money to stay afloat and Missouri has met the “maintenance of effort” requirements of the federal act allowing us flexibility in the use of that money.

We now have three basic choices:  return the money to Washington, spend it on pet projects, or return the money to the people of Missouri in the form of a rebate.

There are advocates for each of these alternatives.  Returning the money isn’t an option, because it will be directed to other states and still get spent by Washington saving us nothing.

Spending the money on pet projects will do little, if anything, to create jobs.  Government doesn’t create jobs, people do and we should not lose sight of that.  Unfortunately, many politicians believe otherwise.  Most of these pet projects are capital improvement projects which benefit only one industry and then only marginally.  Government “make work” projects are temporary and will not achieve the fabled “multiplier effect” sought after by the Keynesian.

On the other hand, there are a few capital projects that need our attention, e.g. a statewide interoperability system.  A project such as this is a long-term asset for the public good, but these projects should be few in any spending plan.

This brings the discussion of using a sizeable amount of the $1.2 billion to put money back in the pockets of Missourians in the form of a rebate.  This is exactly what Washington does not want us to do with the money, which means it is probably the best route to take.

Admittedly, a rebate by itself won’t work in stimulating the economy due to its temporary nature in a families’ disposable income.  The last federal rebate did not increase consumption or stimulate aggregate demand.  It did help families with meeting monthly expenses, paying down some debt, or putting the money into savings - all good things.

This money gives Missouri an opportunity to provide real stimulus for Missourians.  A rebate, coupled with a permanent tax cut will stimulate Missouri’s economy and help Missouri families.  This past week, the Missouri House passed a permanent income tax cut and that bill is now in the Senate for consideration.

The General Assembly has an opportunity to put into place a stimulus package that will work by combining a one-time tax rebate for each Missouri income tax filer and passing a permanent income tax cut.  This approach is lasting; a permanent income tax cut isn’t a blip on the screen for Missouri families’ disposable income.  It is pervasive throughout the economy benefiting individuals and businesses, especially small businesses in each of our communities and denies the government from picking winners and losers. 

It is also predictable in the long-term, Missouri families and businesses will know what to expect in the years to come.  There will not be a question of whether a government check will come in the mail alleviating the erratic, politically driven government interventions seen to date, the tax code will remain beneficial to our pocketbooks beyond the rebate check.

Short-term fiscal policies will fail to promote long-term growth.  These proposals are intended to allow people keep more of their own money, to allow them to make decisions for themselves and their families, to give individuals more liberty in their consumption, savings, and debt retirement.  

The Fair Tax

An old adage tells us that high tax rates don’t redistribute income as much as they redistribute people.  In the next census, it is expected that Missouri could lose a congressional seat.  These seats are apportioned by population and this would indicate that Missouri is not growing as fast as other states.  This loss of a congressional seat would reduce Missouri’s representation and ability to influence Washington. 

Where are these people going?  Over 20,000 people a day are relocating from one state to another.  Americans are leaving the Northeast and the Midwest in favor of Southern and Western states.  While a number of factors come into play like climate, quality of life, and housing prices to name a few, it is also true that taxes are a motivating factor.

Of the 12 top states netting new residents, eight of them do not have a state income tax.  Those on the Left would tell us that people are willing to pay more taxes to get better government services, but the migration patterns strongly suggest otherwise.  Interestingly, the people who tend to be the most mobile tend to be the most educated and motivated, or to put it bluntly, are taxpayers – tax them too much and they may not be here in the future to tax at all.

The Missouri House is taking steps to reverse this trend by reducing our state income tax burden.  One proposal (HB64 & 545) would increase the dependency exemption to $1600 per dependent, increase the deductibility of your federal income tax liability ($5000 to $7000 for an individual and $10,000 to $15,000 for married taxpayers), and reduces the income tax rate from 6% to 5½% for all Missouri taxpayers on their income between $8000 and $50,000.  This legislation is pending before the House.

This week the Missouri House passed the Fair Tax (HJR36) which would replace the individual and corporate income taxes and sales and use taxes with a sales tax on retail sales of new tangible property and taxable services at a rate of 5.11%.  This legislation is in the form of a constitutional amendment and would require approval by the voters of this state to become effective.

If approved, the Fair Tax would begin January 1, 2012.  Missouri taxpayers would no longer pay state income taxes, but instead would be taxed on the goods and services they purchase.  The proposed amendment includes a provision to establish a rebate for low-income households.  The rebates provided with the Fair Tax would greatly benefit lower-income Missourians who would keep more of their paychecks and have most of their paid sales taxes refunded to them.

The Fair Tax would provide wage earners with an immediate increase in disposable income as there would no longer be state withholdings from their paychecks.  Taxpayers will be able to decide whether to save or spend giving themselves more discretion and decision making power in deciding how much to pay in taxes.

These proposals are intended to allow people keep more of their own money, to allow them to make decisions for themselves and their families, to give individuals more liberty in their consumption, savings, and debt retirement.  

Drug Testing and Welfare

This week, the Missouri House passed legislation (HB30) which prevents drug-users from receiving welfare benefits. The legislation calls for the Department of Social Services (DSS) to establish a drug-testing program for work-eligible applicants and recipients of the Temporary Assistance for Needy Families (TANF) program. This is a cash-aid program and currently has NO restrictions for those who may use illegal substances. If passed and signed by the Governor, Missouri would become one of eleven states that practices drug testing provisions for welfare applicants – it’s about time.

The legislation says that to be tested, there must be "reasonable cause" to believe a person is using illegal drugs. After an administrative hearing, applicants or recipients who test positive will be declared ineligible for benefits for one year. The bill provides help to those suffering from substance abuse. The legislation requires DSS to refer the positive testing individual to a substance abuse treatment program approved by the Division of Alcohol and Drug Abuse.

This legislation is long over-due. Most employees, including the military and federal employees, are required to take a mandatory drug test. Why shouldn’t welfare recipients who receive support from OUR hard earned tax dollars be held to the same standard?

This legislation will help encourage people using drugs to stop and get help. It is a necessary intervention. If people want to receive welfare benefits, they have to be drug-free. The Senate needs to pass this bill and the Governor should sign it. This legislation will begin to help and enable our citizens to live a clean and productive lives rather than harming themselves and those around them.