For an idea of the warped priorities driving the current tax-cut obsession in Jefferson City, consider two elements within the latest offering from the Missouri House: One, it would exempt capital gains from the state income tax for individuals and potentially for corporations. That would, by definition, benefit only those wealthy enough to make their money through stock dividends and asset sales — at an ultimate cost to the state treasury of almost $300 million a year. At the same time, the House plan would continue to charge state sales tax on diapers and feminine hygiene products.
The House notably leaves out a provision earlier passed by the Senate that would nix those taxes as a modest give-back to lower-income Missourians who won’t be benefitting from the capital gains tax cuts. Sorry, says the House, but working mothers still need to pay up. After all, someone has to help fund those capital gains tax cuts for millionaires and corporations.
Beyond that upside-down, coddle-the-rich ethos driving this nihilistic project is a broader problem: This is about the worst time imaginable for major state tax cuts — particularly cuts that primarily benefit the wealthy at the expense of regular Missourians. Consider the fiscal moment that state governments are in right now. The flood of federal money they saw during and after the pandemic has mostly dried up.
The Trump administration’s tariff binge threatens to explode consumer prices and, according to many mainstream economists, has already put America’s economy on a path to recession. That will put financial stress on working families even as the administration’s deep spending cuts threaten to hollow out federal services from Medicaid to school lunches and spur potential disruptions in distributing tax refunds, Social Security checks and veterans’ benefits. All of this portends a perfect storm that will hit lower-income working people harder than anyone else.
It’s in this economic atmosphere that Missouri’s ruling Republicans want to shove through tax cuts for the rich that will inevitably erode state government services for vulnerable Missourians even as federal services are being mothballed? Another proposal on the table would move Missouri’s current graduated income tax to a flat tax rate. Taken together, this and the other proposals could potentially blow a $1.7 billion hole in state finances with tax changes that would (surprise!)
primarily benefit the rich. It’s really not that complicated: Reduced tax receipts inevitably mean reduced governmental services. The tax cut proposals currently moving through the legislative process threaten to hobble our already dysfunctional state government just as America enters a period of deep economic uncertainty.
Even if you accept the Republican article of faith that high-end tax cuts are some kind of magic elixir that will automatically boost economic activity (historical evidence for this is paper-thin), there is a time and a place for everything. And this is emphatically not the time to start preemptively limiting Missouri government’s resources going forward. Call your state legislators today and encourage them to hold off on tax giveaways to the wealthy at least until the full extent of the approaching economic turmoil is clear.
Individual state legislators’ contact information is available at house.mo.gov and senate.mo.gov.
