By Johnny Kampis | Missouri Watchdog
ST. LOUIS – The modern border war between Missouri and Kansas involves tax breaks instead of gunplay, and it’s a boon for corporations as lawmakers fight for their business.
Missouri Rep. Eric Burlison, R-Springfield, recently filed a bill he calls the Broad-Based Tax Relief Act, which would cut by half the income tax burden for all state-based businesses over five years.
“We’re competing with our neighboring states for jobs and we have to do everything we can to remain competitive,” he said. “Kansas just cut taxes for more than 190,000 businesses, and we’ve already heard some Missouri businesses talk about moving across the border.”
Good Jobs First released a report last month showing interstate job piracy is on the rise, with many bordering states trying their hardest to poach companies and the employment opportunities they bring.
GJF Executive Director Greg LeRoy said in many instances companies get big subsidies for moving an insignificant number of jobs.
“The flip side is job blackmail,” he said. “The availability of relocation subsidies makes it possible for companies that have no intention of moving to extract payoffs from their home states to stay put.”
Kansas’ Promoting Employment Across Kansas, or PEAK, program has landed a number of big fish, including movie theater chain AMC Entertainment, which moved its headquarters from the Missouri side of Kansas City to the Leafwood suburb in Kansas in 2011.
The Sunflower State handed out $47 million in tax breaks to close that deal, which brought 400 jobs across the border.
Missouri is the only state that offers two tax incentives to its corporations that allow them to keep 100 percent of employee withholdings. Normally, those taxes would go to state services, but under these programs they go into the pockets of the businesses.
The Missouri General Assembly created the Quality Jobs Program in 2005 to keep St. Louis-based pharmacy benefit manager Express Scripts in the Show Me State after it threatened to move elsewhere.
Since then, Express Scripts has collected $17 million in subsidies. The QJP awarded $51 million in tax breaks in 2011, spurring State Auditor Thomas Schweich to give Gov. Jay Nixon’s Department of Economic Development a “poor” rating in an audit for overstating employment numbers, among other “significant weaknesses.”
Some Missouri lawmakers are considering reining in some of the state’s various tax incentives, which allowed nearly $630 million in fiscal breaks last year, as others propose new tax breaks such as Sen. Eric Schmitt’s six-year $18 million proposal to lure amateur athletic events to the state.
Burlison’s House Bill 536 would phase in the cuts over several years, beginning with a 10 percent reduction in 2013 and increasing 10 percent each year to 2017. The legislation would include a corresponding reduction in corporate income tax.
Burlison said the tax cuts would “give existing employers the additional dollars they can then reinvest in their employees and increase Missouri’s tax revenues.”
University of Missouri labor economics professor Peter Mueser wonders if a cut in the corporate income tax rate might spur an increase in the state’s sales tax down the line. Mueser says sales taxes tend to be cyclical, and therefore less steady.
“If they would raise sales taxes to replace income tax, that could be a problem,” he told Missouri Watchdog.
The House Committee on Children, Families and Persons with Disabilities last month passed another piece of Burlison legislation, House Bill 87, which restores several “benevolent” tax credits that expired in August. These incentives allow those who contribute to various charitable organizations to receive state credits. The House is considering the bill.