Missouri Joins the Tax Cutters

Gov.

Mike Parson

said Tuesday that he’d approve the package soon, and last month he convened the special session that brought it forth. He’s happy with the final product, which he says would “provide lasting tax relief to every taxpaying Missourian.” Yet as legislators have worked to pass the most ambitious plan possible, Mr. Parson has both given and taken away.

Start with the good. Before he called legislators back to Jefferson City to write the current tax plan, Mr. Parson vetoed a previous version in June that offered one-time rebates instead of permanent rate cuts. The GOP-controlled Legislature overwhelmingly approved the plan to send out $500 checks, which surely would have been popular. But only rate reductions lock in the benefits for future years and let households and businesses plan accordingly. The Governor demanded “permanent tax cuts that provide real relief.”

The veto bucked a trend in many states. Perhaps inspired by the Covid “stimulus” checks, 19 states have sent or plan to send rebates this year. The move is more justified in some states than others: Some cut tax rates at the same time they offered checks, and some have laws that require rebates in the event of a surplus. Regardless, Mr. Parson is right that one-time checks produce less long-term economic return on the money.

Unfortunately the process was messier from then on. Republicans in the state House budget committee approved a version of the plan that would have halved the corporate-tax rate to 2% from 4% today and eventually phased it out. House leaders were working to secure Senate support until the Governor announced he opposed both changes. The House then rushed to approve the current, Senate version while Mr. Parson gave little public explanation for his opposition.

The pullback is unfortunate because the abandoned changes would have helped the state economy. Missouri rests between the Midwest, South and Southwest, and it competes with states in all of them.

The state’s coming 4.5% top income-tax rate may make it a belle compared with Nebraska and Iowa, but it barely edges out Oklahoma’s 4.75% and pales next to zero-rate Tennessee. Its 4% corporate rate is highly competitive, but the state’s $4.9 billion surplus—more than double the record set last year—provides a good opportunity to go lower.

Mr. Parson indicated that he’d be open to the corporate cut in a future session, and businesses will be watching. Meanwhile, the income-tax cut will take its first step downward in January, keeping Missouri on the same promising fiscal path that more and more Republican-led states are taking.