Q&A #1: Is Tax Reform Possible in Missouri?
Short Answer: Field goal, yes. Touchdown, no.
Director of Revenue Joel Walters gave an in-depth interview with TaxNotes. He once again advocates for a radical restructuring of the Missouri’s tax system. See the article here.
On The State’s Reliance on Income Tax
Missouri raises 71 percent of its general revenue from the individual income tax and close to 4 percent from the corporate income tax. “Nearly 75 percent from income taxes — I would put that forward as Challenge Number One” for Missouri’s tax regime, Walters said.
On His Forthcoming White Paper
[Walters] is preparing for Greitens a white paper that will focus on broad tax reform for Missouri. For the first few months of his term, he was chair of Greitens’s Committee for Simple, Fair, and Low Taxes. That committee produced a report June 30 that focused primarily on recommendations about tax credits, and then decided Walters should write a paper on reform of the entire tax regime.
Walters said he will not recommend actions, but rather will present ideas that are worth discussion. Less reliance on the income tax and other ways to raise revenue will be a cornerstone of the paper, which he said he plans to complete in the next several weeks…
“Our corporate income tax has over 600 credits, exemptions, and special rules,” Walters said. “Our sales tax has another 200 special rates and exemptions. I look at that and I see a very complex environment that I don’t think is conducive to fairness, stability, or a transparent, certain, business environment to operate in.”
On Gross Receipts Tax
Walters said he does not think Missouri should add another tax, but he wants to discuss eliminating the corporate income tax and reducing the individual income tax. In that light, he said, a gross receipts tax “is worthy of consideration as a replacement.”
Walters said his private experience has made him aware of concerns about tax pyramiding and other things many policy experts dislike about a gross receipts tax. But he said he still thinks the tax is worth talking about as a possibility for Missouri.
For one thing, Walters said, he thinks the gross receipts tax is a simple tax. “It’s a number times a rate,” he said. “It gets you out of the business of picking winners and losers. It gets you out of the business of a complex system. It is also a much more stable stream of income for the state as opposed to something that is more volatile [the income tax] and is impacted by upturns and downturns.”
On Streamlined Sales Tax
On the sales tax side, Walters said his paper will include consideration that Missouri join the Streamlined Sales and Use Tax Agreement. While the state has not created legislation or a rule that would directly challenge Quill Corp. v. North Dakota, Walters said he thinks less direct methods such as Colorado’s reporting law should be part of a tax reform discussion…
First, this might be the most important line of the article… “Walters, who is serving in his government job after decades in the private sector….” Without government experience, he may vastly underestimate how hard – politically – some of these proposals will be to accomplish.
When I inquired of various players what they thought the odds were for this kind of radical realignment, no one gave it a snowball’s chance. For example (one of the more polite responses): “It sounds like his paper will be a nice academic exercise on the ideal text structure for Missouri. However, that's not the world we live in.”
While there’s a lot of hot air about “not picking winners and losers,” the legislature’s (and governor’s) impulse is toward doing just that. Whether it’s trying to help Rep. Don Rone’s district through a special session or the now-lieutenant governor’s beef tax credit, the whole system of representative democracy is constantly mobilizing to help some specific interest.
Eliminating hundreds of these “giveaways” (or “incentives” depending on their point of view) will instantly create a coalesced opposition to the reform.
The same person, though, who called the Walter’s exercise “academic” sees some hope… “I expect Greitens will be in office for seven more years so if they take a methodical approach they can accomplish some gains...”
The road forward then is not one grand restructuring of the tax system, but taking a divide and conquer approach. They need to close a few loopholes each year, carefully calculating how much can be accomplished without provoking a critical mass of resistance to sink the whole effort.
Fake Regulatory Relief = Bad Idea
MOScout readers were not kind to the notion that changing “shall” to “will” would make Missouri a less burdensome state. In fact, they think it’s dangerous…
Reader #1: Regarding the "shall" order - in addition to being completely arbitrary, it seems they don't understand that some "shalls" protect the very people they say they're helping: taxpayers, business owners, and anyone going against an agency. From the examples you gave: "Any party shall have the right of cross-examination" - This basic due process shall protects litigants. It's a good "shall" - that is, if you like the Constitution… Toddlers are in charge.
Reader #2: The general rule of statutory construction is that the word "shall" is mandatory, not permissive. Welch v. Eastwind Care Center, 890 S.W.2d 395 (Mo.App.W.D. 1995); Neal v. Director of Revenue, 312 S.W.3d 444 (Mo.App.S.D. 2010). Missouri case law uses a different rule as applied to time limitations. "When a statute provides what results shall follow a failure to comply with its terms it is mandatory and must be obeyed; if it merely requires certain things to be done without prescribing the results that follow, the statute is merely discretionary." Frager v. Director of Revenue, 7 S.W.3d 555, 557 (Mo.App.E.D. 1999). See also State ex rel. Tanner v. Nixon, 310 S.W.3d 727 (Mo.App.W.D. 2010) citing SSM HeatlhCare St. Louis v. Schneider, 229 S.W.3d 279, 281 (Mo.App.E.D. 2007), "When a statute mandates that something be done by providing that it "shall occur and also provides what results "shall" follow a failure to comply with the statute, it is clear that it is mandatory and must be obeyed." Who knows what the hell will is. Likely mandatory but any lawyer worth his salt won't use it and find out… amateur hour.
Reader #3: The problem with making changes to rules that are not intended to actually change the rules is how the courts will view them. The rule the courts follow is that it is presumed that any change to statute or rule is not a "useless act" and a change is presumed to have "substantive effect". State v. Liberty, 370 S.W.3d 537, 552 (Mo. Banc 2012).
Roorda for JeffCo Executive
Post-Dispatch reports that former Rep. Jeff Roorda is planning to run for Jefferson County Executive. See it here.
Pull Quote: The Democrat says if he wins, he will step down from his role as business manager for the St. Louis Police Officers' Association… Roorda was a police officer for 17 years, most of which he spent in Arnold. He was a Democratic member of the Missouri House of Representatives, from 2005 to 2010 and again from 2013 to 2015. Roorda ran for the Missouri Senate in District 22 in 2014, but lost to a Republican. But he's most known for his outspoken views on law enforcement.
eMailbag on Rucker for Senate 34
To give [a little] more context: [Martin Rucker II] did not lose in House 14 because of Donald Trump. In fact, Hillary carried the district by 49-41 over Trump. Top of the ticket Ds (Clinton, Kander, Koster, and Carnahan) all carried the district by 8-11 points in 2016… But Senate 34 will definitely be a tough race [for Rs]. It may go Democrat if RTW is on the same ballot, assuming none of the current Republican candidates have Labor support.
Powered by Mary Scruggs’ indispensable calendar:
Senate Majority Retreat – Big Cedar – Branson
Senate Campaign Comm. Golf – Buffalo Ridge Golf Course – Branson – 9AM Tee.
Lobbyists Registration Changes
Thomas Robbins added Scenic Missouri.
Jewell Patek added Spire Missouri Inc; and deleted Home Builders of Missouri, and Laclade Gas Company.
Whitney O’Daniel deleted ABB Inc., and Associated Industries of Missouri.
New Approach PAC - $10,000 from Vance Farms.
Holly PAC - $10,000 from Rex Sinquefield.
Missouri Senate Campaign Committee - $10,000 from QC Holdings.
Missouri Senate Campaign Committee - $25,000 from Drury Development Corporation.
Missouri Senate Campaign Committee - $15,000 from Menlo Smith.
Missouri Early Voting Fund - $147,289 from Buzzards Bay Strategies.
CL PAC - $10,000 from David Steward.
Missouri Forward PAC - $7,500 from Missouri State Council of Fire Fighters PAC.
Happy birthdays to Sens. Maria Chappelle-Nadal and John Rizzo, Zora Mulligan, and Josh Foster.