A recent Commerce Department report says Missouri’s economy grew much more slowly last year than the rest of the nation. The department ranked Missouri 43rd in economic growth last year with less than 1 percent growth. The National average was 50 percent higher at 1.5 percent, certainly not robust growth, but far better than Missouri’s numbers. The department’s studies show almost every sector of Missouri’s economy grew more slowly than the average — or shrank.
There are three major requirements to return jobs and prosperity to Missourians:
legislation to eliminate government-mandated union membership so Missouri can compete with neighboring right-to-work states; regulatory reform that will free small businesses from excessive and punitive regulation and engage the power of the free market; and comprehensive tax reform that eliminates the politician-empowering income tax and replaces it with a consumer-empowering consumption tax.
A number of concepts have combined to separate Americans from the liberties enshrined by our founders and defended by our ancestors. One is mercantilism (sometimes called public/private partnerships or crony capitalism), an economic model developed in Europe, and based on detailed government intervention in economic affairs. Mercantilism depends on government “ … to control, regulate, subsidize and penalize commerce and production.” It empowers bureaucrats and wealthy special interests, which weakens the average individual and small business owner. Over time, it moves competition away from the marketplace to the state and federal capitols. For instance, companies discover that it is cheaper and often more profitable to lobby in Jefferson City than to compete in a free market.
Onerous regulations on businesses imposed by unelected bureaucrats in agencies that regulate such things as agriculture, conservation, labor practices, natural resources, public safety, health, and so on also stunt business growth. When business owners increasingly are bogged down with hundreds of thousands of pages of regulations, and more and more paperwork, as well as the potential for heavy fines and threats of lawsuits imposed by missing the smallest detail, it is difficult just to survive, let alone thrive. The entire structure of our economy shifts from entrepreneurship, opportunity, and growth to one of status quo and survival.
Comprehensive Tax Reform
The progressive income tax stifles the most productive individuals and institutions in society and shifts intellectual and economic energy away from generating wealth toward hiding it. It becomes a disincentive to savings, investment and prosperity. It empowers politicians to pick winners and losers via tax credits and exemptions and results in all manner of appeals from business interests for special treatment. It rewards bad character and taxes good.
Tax discussions focus too often on “reform,” but real tax reform can only be accomplished by eliminating the state income tax and replacing it with a consumption tax, which broadens the taxpayer base and makes sure that all Missourians are contributing to the general welfare. Nothing else has as proven a record of growing jobs and attracting business.
Almost no one likes the income tax as now written, and no one would design such a system from scratch. Opposition to serious tax reform is related to special interests more than convenience, efficiency, fairness or transparency. Yet, an honest appraisal of each of these characteristics always favors taxing consumption over taxing productivity or success.
How would such a system work? One example as outlined in the Missouri Jobs and Prosperity Act would:
eliminate all state taxes on income, including personal and corporate income, franchise, estate, capital gains, interest/dividend and payroll;
replace state revenues with a maximum 7 percent sales tax on retail purchases of goods and services;
eliminate sales tax on business-to-business education, or used-item purchases;
not change state taxes on gasoline sales; and
adjust existing local sales taxes to counter the expanded tax base.
Every state that does not have an income tax is outperforming Missouri and is well above average in measures of prosperity, population growth and jobs. Their performance stands to reason because they do not tax away prosperity, making them not only business friendly but also family friendly and success friendly.