Missouri Governor Jay Nixon claims to oppose tax increases, yet while he talks the talk it is questionable whether he walks the walk. In his 2010 State of the State address, Governor Nixon, who has not signed Americans for Tax Reform’s Taxpayer Protection Pledge, proclaimed his supposedly firm stance against taxes by saying,
“I think we should hold the line on taxes. I’ve said that. I’ve been consistent in that and I’ll remain consistent. We’re going to balance this budget with the resources people give us. We’re going to make it work. You have to make sure you do that. We’re not going to solve the problems of Missouri by taking government’s hands, at this time, and dipping into people’s pockets.”
While Nixon’s words suggest one course of action, his actual policy proposals indicate another. According to the St. Louis Business Journal, Governor Nixon and his Economic Development Director David Kerr have proposed capping the state’s tax credits at $314 million a year, which is $134 million or about 30% less than the $448 million redeemed and paid out in 2009. Furthermore this is about 48% of the $656 million authorized in 2009.
Many view tax credits as a sort of double-edged sword. They are beneficial in that they return taxpayers’ money to the people and in turn encourage economic growth. They are flawed in that they are inherently redistributive, taking money from some people and giving it to others, and are often viewed as government hand-outs to interest groups.
Yet, according to a study by Rutgers University, at least some of these supposed “hand-outs” are in fact legitimate job-creating policies. The study shows the positive impact of historic tax credits and further notes that Missouri is one of the largest beneficiaries of these credits in terms of jobs and income. This makes sense: putting money back into the hands of the people likely produces jobs…and guess what? Nixon proposes cutting and capping these credits more than any other!
In a recent speech in southern Missouri, Nixon said, “In many areas, tax credits aren’t creating a positive return on development.” Sure, some tax credits may not have created quality jobs. Yet this can be easily laid at the feet of inefficient use of credits. Perhaps Missouri should provide tax incentives to small businesses that could benefit the state economy for extended periods of time instead of to movie productions.
With the budget Nixon outlined in January facing as much as a $500 million shortfall amid shrinking tax revenue and fading federal aid, something clearly has to be done to fix this shortcoming. What are the options? Tax, cut, or pray. As ATR has shown in the past, taxation is not the solution to economic woes. Praying? Leaving the procurement of funding for our schools, roads, and vital resources to divine powers is probably not a good idea.
Cutting spending and optimizing the allocation of government funding is the most promising solution. Many cuts have been proposed that will allow a sleeker, more efficient Missouri government to function on a balanced budget, even if the state does not receive the $300 million in federal stimulus money that Governor Nixon initially included in his budget. The only praying we need to do is for Governor Nixon to “remain consistent” as he claims to be, and for Missouri politicians to realize the problem is spending, not revenue or credits.