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Missouri policy group recommends income, property tax changes in 2024

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(The Center Square) – Missouri legislators filed dozens of bills dealing with almost every type of taxation, but a nonprofit public policy group provided a narrower focus for the 2024 session.

Reforming income tax, property taxes and creation of a taxpayer bill of rights were highlighted in the Show-Me Institute’s “2024 Blueprint: Moving Missouri Forward.” The 28-page document examines 16 areas for possible reform and the word “tax” is mentioned 162 times.

The document states Missouri’s economy is “suffering because of an overreliance on income tax as a source of revenue.” The free market think tank proposes continuing to reduce or eliminate individual income taxes and earnings taxes.

“Such a reliance on these growth-destroying taxes – on income taxes at the state level and earnings taxes in Kansas City and St. Louis – has consequences, and Missourians have demanded reform in these tax policy areas especially over the last five years,” the report states.

The organization praises the legislature’s motivation to reduce the state income tax to 4.5% but criticizes the rate’s link to the state’s revenue benchmarks.

“If the state government can operate at lower income tax rates, it should,” the report states.

The organization recommends the legislature ensures the income tax is “low and broadly based by reducing or eliminating tax subsidies.” It also recommended reducing reliance on the income tax “in favor of less-damaging forms of taxation such as property taxes.”

However, the report identified several areas to reform property taxes, including better assessment practices.

“Property taxes work best when they are predictable, broadly based, and targeted to the local services that benefit residents,” the report said. “Missouri assessors should more uniformly assess residential property by using an average-based system instead of individually assessing every property, which leads to increased variances between neighbors and undermines trust.”

The organization recommends adoption of a taxpayer bill of rights, referred to as TABOR in some states. It said the law controlling the state’s tax and expenditure limit – the Hancock Amendment approved by voters 43 years ago – no longer provides an effective check on government growth.

“The solution is to say we need to enact a speed limit on the size of government,” Aaron Hedlund, chief economist for the Show-Me Institute, said during a webinar last month. “That speed limit should be the rate of inflation plus population growth. What that means is revenues would not be allowed to grow faster than that without voter approval. And if revenues did come in faster than that, then there would be automatic tax (refunds) sent to the voters.”

Hedlund mentioned the Colorado’s TABOR as an example of the policy’s success.

“And there are ways to even strengthen it in Colorado, but that’s been very effective there in keeping their government from growing too rapidly,” Hedlund said. “… there was an effort to try to undermine that a bit and it was defeated. So it’s something that enjoys broad-based support in Colorado and the reason is they’ve seen it work. They have seen actual refunds arrive in their pockets because of this protection.”

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