Last year Governor Nixon froze $400 million worth of spending allocated for education, state services and capital improvements. He took this action in order to make it clear that efforts by the legislature to override his veto of HB253 would result in long-term damage to state revenue that would have to be offset by reallocating funds:

“The choice before us is stark and clear,” Nixon told reporters.  “Members of the General Assembly can either support House Bill 253 or they can support education, but they can’t do both.”

The Governor’s dramatic action, which simply underlined the detailed evidence he had already made available to support his arguments against the tax-cut, seemed to have worked. HB253 went down in figurative flames, enabling Nixon to free up some of the frozen funds.

Given the braying about spending offsets for every piece of social services spending that we get from national Republican legislators, you’d expect our GOP homies would understand how it works and man up. But no way. Nixon’s strategy enraged plenty of Republicans who were confident that they were going to be able to deliver a juicy tax-cut for their corporate patrons. Who, after all, likes to be outplayed, especially when, to all appearances, one holds all the cards?

But elephants never forget, and state GOPers now think they’ve figured out a way to get payback and thwart future efforts to make education the topic when they want it to be nothing but tax-cuts:

The Missouri Constitution allows the governor to control the rate appropriations are spent and to reduce spending when state revenues are less than the estimate upon which the budget is based.

Republican Sen. Ryan Silvey, of Kanas City, has proposed a constitutional amendment that would exclude spending through the Department of Elementary and Secondary Education from that budget-trimming authority. A constitutional amendment would require a statewide vote if it passes the Legislature.

There  you have it: Rep. Silvey’s SJR45 , a tit-for-tat move that, by putting a constitutional amendment on the state ballot, seeks to tilt the playing board for future tax policy games. It’s an interesting move since Missouri House Speaker Tim Jones claimed that the Governor was violating the constitution last year. The fact that nobody took the Governor to court and that the GOP is now hoping to ask Missourians to amend their constitution, suggests that they didn’t really think the constitutional objection had much weight. Republicans were simply playing the empty constitutional card that they always pull when they’ve not got anything else up their sleeves.

Although the true purpose of of Silvey’s gambit is clear, he also wants to pose as a stalwart supporter of education by ignoring the context the Governor’s actions, the threat posed by the Republican corporate tax-cut, tweeting “Today I filed SJR45 to amend the MO Constitution to prohibit the Governor from withholding money from schools. Education is too important. ” Damn straight education’s important. That’s why the Governor did what he did.

Silvey later added, “My SJR45 will finally remove school kids from being a piece on the Governor’s political chess board.” I don’t know about you, but I’d be glad to let the Governor use my children as pieces on his “political chess board” if it saved their schools from Republican raids on the state’s revenue stream. Good schools cost money. Heck, even mediocre schools cost money. Tax-cuts for corporations and rich people take the money we need for schools, among other things, and, to be honest,  they haven’t done much for the economy of states that have beggared themselves through  this type of tax-cutting. What we ought to be asking Silvey is, if he’s so big on eduction, why isn’t he proposing a way to secure some new revenue to pay for it?

Nobody wants to hurt education and, in general, at any rate, everybody likes the idea of tax-cuts, but the two are tightly linked in Missouri, a state that currently can’t manage to properly fund its schools. Why does it bother Republicans so much when this linkage is made explicit? Why can’t they be upfront about the consequences of their low- or no-tax philosophy? And finally, why should anyone vote for Silvey’s constitutional amendment, which is no more than a cynical effort to checkmate a Governor who’s trying against all odds to improve Missouri’s mediocre educational system.

 

Today an article in the St. Louis Post-Dispatch confirmed my fears that although HB253, the corporate tax-cut bill has been laid to rest at last, it will be resurrected poste haste in January when the legislature reconvenes:

On a media blitz Wednesday, House Speaker Tim Jones detailed his plan to strip out the portions [from HB 253] that Nixon found objectionable and push the legislation as the first bill of the coming session.

Those portions to be stripped out – that’ll be the hidden sales taxes and “unintended consequences” segments. Savage cuts to already low corporate taxes will remain, despite the potential damage to the state’s dismal revenue stream. Missouri’s GOPers are, after all, desperately eager to follow the “trend” set by Republican statehouses in Oklahoma, Kansas and a few other states that are attempting to spur economic growth by bankrupting their states.

It was clever of Governor Nixon to make the question of education funding the lynch-pin of his struggle to sustain the veto of HB253. Educational funding in Missouri is already dismal – per student funding in the state of Missouri is 3.1% lower than it was in 2008. But hey, guess what? Take a look at Oklahoma, one of the states that recently decimated its system of taxation – and which our Missouri GOPers cite as an example of what we have to do to be competitive. Oklahoma is now spending 22.8% less per student than it was in 2008 and is one of only 15 states that cut its per student spending this year. As for Kansas, one result of its tax cutting orgy is per student spending that is 16.5% less than in 2008 – and, according to a state district court,  failing to provide students a ‘suitable’ education.” The Governor was simply trying to warn concerned Missourians that we could expect the same deterioration in our school system if we followed the tax-cutting trend that has afflicted these states.

What the Governor didn’t tell us and what many don’t realize, though, is that many of those folks behind the tax-cutting frenzy actually want to starve public education. They probably look at those Oklahoma and Kansas education spending figures and chortle with glee.

One of the staunchest supporters of the effort to revive HB253 – to the tune of over $2 million – was St. Louis billionaire Rex Sinquefield. A year ago he floated ballot initiatives to cut income taxes and shift the burden of Missouri taxes onto the backs of the poor and middle class via expanded sales tax increases – while seriously decreasing state revenue. According to Steve Kraske, House Speaker Tim Jones wouldn’t have even brought up the sure-to-fail HB253 for an override vote if not for Sinquefield:

If you believe the hallway yak in the Missouri Capitol, Jones sought a vote on the tax bill only because the Missouri GOP’s leading benefactor, Rex Sinquefield, demanded it. Jones wanted to keep the rich guy happy more than he did his own colleagues, even though the speaker knew the vote was a loser.

Sinquefield is a never say die type of guy, and this issue is one of his two two major political obsessions The other is privatizing eduction. He has spent money lavishly attempting to drive a wedge between Missourians and their public schools, seizing on the disenchantment many feel as they are bombarded with news of failing schools in districts coping with poverty and social malaise. Nevertheless:

Education groups have balked at many of his educational initiatives, especially efforts to use state tax credits for private schools. He also sparked a backlash last year when he referenced a column in a central Missouri newspaper that seemed to suggest that the Ku Klux Klan created public education to harm black children.

You want to know why we’ll have to deal with the zombie tax-cut bill again next year and why the fight to adequately fund our public schools is a losing cause? Look no further than Rex Sinquefield and the folks who think like he does, along with the politicians who, as Steve Kraske suggests, are wholly owned subsidiaries of Sinquefield Inc.

Folks like Sinquefield are the reason that the education-for-the-future gambit that our Governor is playing to ward off tax butchery is so precarious. He’s threatening an outcome that they’ve been trying to achieve for years – the elimination of public schools, leaving education to a free market that doesn’t give a damn about the children of those on the bottom of the social heap.

The New York Times today chronicles Governor Nixon’s smart tactics in the battle over whether or not his veto of HB253, the GOP’s rope-a-dope tax cut bill, will stand. While it’s not a done deal, the Governor has at least put up a fight and has a strong chance of prevailing:

As a Democrat facing a State Legislature with veto-proof Republican majorities, Gov. Jay Nixon of Missouri has not claimed big victories lately. So when he began stumping the state against a deep Republican tax cut that he had vetoed, he might have seemed to be on a political fool’s errand.

But over the summer, Mr. Nixon has turned the debate away from the Republican argument that lower taxes bring jobs and recast the tax cut as one that would hurt education and mental health services. The state’s school boards have rallied to his side. More than 100 of them have passed resolutions supporting the veto. And with a veto session set to begin on Wednesday, it is the supporters of the tax cut who are now pessimistic.

The most interesting part of the Times article, however, involved a comment from the brand new Chair of the Missouri Democratic party, Roy Temple:

“Democrats are often far too timid to stand up and call them [i.e., Republicans] out when they’re doing something that’s destructive,” said Roy Temple, the chairman of the Missouri Democratic Party, who spent several years in Washington as a political strategist. “There’s no political risk for pointing out when they’re doing things the wrong way.”

Welcome words after years of watching our state’s leading Democrats quake and quail in the wake of the Tea Party rout of 2010. Maybe it won’t only be the Governor who has discovered that he actually has a spine (although it may be the term-limited Nixon’s political ambitions that have lead to that belated discovery). Wouldn’t it be great to see Claire McCaskill shut-up about budget caps and come out swinging for measures to combat climate change?

Dream on you say –  and you’re probably right. The more important point, however, is that Temple’s remarks may signal a change in the state Democratic Party strategies and tactics which have been the very definition of timid – when they even exist. Maybe Temple will be the man who can not only build a strong, efficient organizational structure to serve the state’s Democrats, but can help to articulate a smart, aggressive strategy to help revive the party’s fortunes in Missouri.

Perhaps I’m reading too much into a few casual words. Perhaps it’s just wishful thinking – God knows there’s been little to nothing in the state to be positive about apart from Jay Nixon’s veto pen. But we have seen remarkable politicians emerge in the midst of red-state deserts – just think of Wendy Davis in Texas. Whether she runs for Governor next year or not, and whether or not she wins if she does run, she has established a beach-head for change. Here in Missouri we also have some thoughtful and articulate Democrats in our state legislature and elsewhere – but what we lack is a strong party organizational structure – something other than a lapdog for prominent state Democrats – to recognize and support their talents.  

Talking Points Memo has some good coverage of the cagematch between our Governor Nixon and Texas Governor Rick Perry that centers on the relationship between tax rates and jobs. TPM raises a point that is significant in view of the upcoming veto session, where at least some state GOP lawmakers will vote to override the Governor’s veto of the disastrous HB253, which would take a tiny nibble out of the income taxes of most middle-income earners and a great big giant bite out of already very low corporate income taxes:

Tax rates, like what Perry and Scott have been flaunting, are oftentimes the favored incentive for governors hoping to lure new business from elsewhere. Actually, Muro said, there is little research to suggest that a business actually sees larger profits or more job creation from moving to a state with a lower tax rate.

“That one’s a particularly fatuous offering because many relocation studies notice that taxes often aren’t a huge part of the operating budget so that that is often the peripheral consideration,” Muro said.

Muro pointed to a study he did with Kenan Fikri, also of Brookings, which found that states are better off trying to foster homegrown businesses rather than through bringing in business from other states.

“The best way to create more jobs in a state is to grow them at home, rather than poach them from elsewhere,” the report said. “Some 95 percent of all job gains in a year in an average state come from the expansion of existing businesses or the birth of new establishments.”

The article notes that Texas has had its credit rating downgraded under Perry’s leadership. Kansas has also seen its creditworthiness downgraded since it started the process of eliminating income taxes – a somewhat cloudy effort it should be noted, since in order to avert total disaster, Governor Brownbeck is trying to come up with more indirect revenue raising schemes, including higher sales taxes.

What is clear about the Kansas experiment, though, is that whether or not there is eventual growth it will be hard times for many years:

What these changes will mean for the Kansas economy over the long-term is a matter of intense debate. A study by the state Department of Revenue predicted 23,000 new jobs for the state by 2020, above and beyond the job growth Kansas otherwise would have experienced. Others are skeptical. A forecast from the Kansas Legislative Research Department, which didn’t account for any economic benefits from the tax cuts, said that they will result in a series of shortfalls that add up to $2.5 billion through fiscal year 2018.

As for job growth, if it ever happens in Kansas,  expect to see low-wage jobs and sweat-shop conditions, especially since wrecking unions seems to be a related goal of the tax-cutters. Bad schools, a poorly educated, poorly paid population with no public services to alleviate their situation, equals a corporate paradise for select types of industry – the type that have mostly preyed on third world countries in the past. As for forward-looking, entrepreneurial businesses offering good salaries, expect to see them thriving in more enlightened parts of the country.

The current employment situation in Texas tends to support this thesis:

As Gov. Rick Perry continues to tout Texas’ low-tax, low-regulation business climate as the secret to the state’s relative economic strength, critics have pointed to Texas’ [high] unemployment rate and low-wage jobs, noting that Texas ties Mississippi for the highest percentage of minimum wage workers.

While loose regulatory policies have permitted many environmentally dangerous practices in the energy sector have probably contributed to growth of Texas biggest engine of new jobs, energy extraction, even supporters of the Texas low-tax climate have to admit that as far as the energy industry goes:

… the governor cannot take credit for recent discoveries of shale formations, the price of oil or “many other factors that have provided Texas with a competitive advantage in recent years.”

I have to admit that I am beginning to think that all the talk about growth is a smokescreen and that the point of this tax-cutting is precisely the social service cuts that everybody pretends to deplore. Jobs – who cares? If job creation were to pick up in Kansas while the same folks hold the reins of the state government, you shouldnt expect to see any new revenue going to education, which has been cut way past the bone, or to provide other services – the tax cutting experimenters, after all, are usually the ideologues who oppose the very idea of public education, call for privately-owned toll roads, and privatization of almost all government functions. I suspect that these folks are getting just what they want – and that many of their compères in Missouri, the ones that are capable of figuring out how to open a paper bag unaided, that is, actually want the same thing.

If none of this sounds too appealing, perhaps you should let your state legislators know that you won’t be too happy if they vote to override HB253, Senators can be found here and representatives here.

Today Governor Nixon stepped up and met his responsibility to the state and we owe him bigtime:

Nixon vetoed the disastrous GOP tax cut bill HB253. Over a ten year period, the bill would have cut corporate income taxes from 6.25% to 3.5%, and personal income taxes from 6% to 5.5%. As Nixon explained, “with a price tag of $800 million, this legislation is an ill-conceived, fiscally irresponsible experiment that would hurt our economy and jeopardize funding for vital public services.”

The reaction was swift, with GOP legislators raging about how radical tax cuts are the only way that Missouri can compete with neighboring Kansas, which has gutted its tax system. The general theme seems to be that Kansas is thriving under its new tax regime; as the Missouri branch of the Koch-funded Americans for Prosperity (AFP) put it when decrying Nixon’s move, “Many of our neighboring states have made bold reforms in the area of taxation, which have catapulted their states into being some of the most economically strong states in the union.”

Kansas is economically strong? Surprising news indeed – although it is not so surprising that it comes from the AFP since an AFP consultant on budgetary matters has been appointed Kansas’ budget director. The jury is still out (way, way out) on whether the tax cuts will spur growth – although we do know that the Bush tax cuts did not result in an economic boom – the Obama administration has already, in five years, bested the eight-year Bush administration record of job creation – in spite of having to beat back the massively deep Bush recession.

Right now, Kansas is not only promulgating a “red-state economic model”, it’s seeing reams of red, red ink that is. A predicted loss of $700 million dollars in revenue for the fiscal year beginning in July means serious budget cuts are ahead – and Kansas Governor Sam Brownback has already radically slashed spending. You name your program and it’s gonna be cut more and cut bad: education, transportation infrastructure, social services. And it’s likely to get worse if the tax-cutting experiment doesn’t work the way Kansas’ GOP is betting it will:

To make up for the revenue drop, the governor is pushing to preserve what was meant to be a temporary increase in the state sales tax, and to eliminate two popular deductions, including the state write-off for home-mortgage interest payments. Those moves would raise about $600 million next fiscal year. He also wants to transfer more than $100 million from a state highway fund to cover other expenses.

Estimates prepared by the state’s legislative research department predict that, even with the steps Mr. Brownback proposes, Kansas is on track to be short of money. The estimates suggest that the state will need to lean on its reserves in the coming years, and lawmakers by 2017 will be forced to make $780 million in spending cuts to prevent a deficit, which isn’t allowed under Kansas law. A Brownback aide said the forecasts don’t take into account the beneficial impact of the tax cuts.

Although, given the sales tax situation, one can argue that Kansas hasn’t really eliminated income taxes, it’s just asking poor folks to pay for all that magical economic growth that will surely reveal itself any day now. Huffington Post quotes one Kansas resident who states that if the home mortgage deduction is eliminated, she will move back to Missouri. Ironic, no?

But not surprising since Kansas is taking a big gamble on radical supply side economics with no real evidence that it will work – and lot’s of history that says it won’t. Why do Missouri’s legislators want us to jump off the same cliff? Shouldn’t they at least wait to see if Kansas survives the fall? Governor Nixon is right to insist that we proceed cautiously and make sure that we can take care of our citizens’ needs. HB253 was passed by a vote of 103 to 51, six votes less than the number required to override Nixon’s veto. We’ve got to keep it that way or we’ll go the way of Kansas.

 

The initial and persistent reason cited by Republican state legislators for the terrible tax “reform” bill, HB253, that they sent to Governor Nixon is that it is necessary if we are to compete with Kansas in securing and retaining jobs. If businesses relocate to Kansas, which has gutted its tax system, they take their jobs with them, or so the argument goes.

The Missouri Society of Certified Public Accountants succinctly summarizes the content of the bill as follows:

HB253 reduces personal [to 5.5%] and corporate tax rates [to 3.25%], establishes for a deduction for flow through income for businesses, and increases the personal exemption amount for low income taxpayers. The legislation offsets the costs of these reductions by implementing the Streamlined Sales tax agreement, expanding Nexus for out of state vendors, and setting revenue growth targets that must be met before the rate reductions are fully implemented.

Although legislators try to lowball the yearly amount of revenue the state would forfeit, putting the cost at around $500 million – which is bad enough – the Missouri Budget Project argues that the tax cuts will cause the state to ultimately lose close to a billion dollars. As for our stalwart lawmakers fear of Kansas, the Post-Dispatch’s David Nicklaus notes that:

The Center on Budget and Policy Priorities, a liberal Washington think tank, recently looked at six states that enacted big tax cuts between 2000 and 2007, and five more that cut income taxes in the 1990s, and found that they gained no particular economic advantage.

Nevertheless, the race to the bottom in regard to corporate taxes is a growing phenomena, particularly in red states.This in spite of the fact that there are possibly better ways to deal with corporate taxes that would address revenue needs without aggravating the ill-perceived worry about competitivenes. Jia Lynn Yang of WaPo’s Wonkblog, cites the example of California’s new sales-based corporate tax law:

… Let’s say a company earns 20 percent of its sales in California. The company would pay 20 percent of its worldwide sales to California at the state’s corporate tax rate. No need to worry about where the firm has offices or where its employees work – and no chance of the firms shifting their income to other states using elaborate, hard-to-trace methods.

Although California’s new law has an elective approach that could be problematic, this sales-based system has been touted as a solution to corporate taxation on a national-level – it would put a stop to corporations like Apple moving their profits off-shore to avoid U.S. taxes. Whether or not it would offer a solution to a state like Missouri – it does not address the issue of the “right” corporate rate – it does show that there are better ways to approach corporate taxes than letting business off the hook entirely without compensating adequately for the lost revenue – or by sticking the state’s middle and working classes with the bill in terms of higher stales taxes, which the Missouri legislation originally proposed to do.

Unfortunately, coming up with such solutions takes a commitment to use government to further the welfare of Missouri’s citizens, along with at least a modicum of intelligence; it also precludes ideological predispositions against taxes as an article of faith. Even more significantly for many Missouri GOP lawmakers, such solutions would not garner big checks from big-time progressive taxation opponents like Rex Sinquefield or the corporate pooh-bahs behind the American Legislative Exchange Council (ALEC), who have been pulling the strings of many of our state pols for some time.