Is a Tax Cut the Best Source of Relief for Missourians Earning Low Wages?

The governor has called a special session next week for the legislature to debate the largest income tax cut in Missouri’s history. The governor’s proposal would: 

  • Reduce the top rate of income tax from the current 5.3% to 4.8%.
  • Increase the standard deduction by $2,000 for single filers and $4,000 for joint filers.
  • Eliminate the first tax bracket – essentially exempting the first $1,000 of income from tax.

These changes to our tax code would reduce Missouri’s revenue by nearly one billion dollars on an annual basis. While we value the governor’s stated intention of providing “lasting tax relief to every tax-paying Missourian,” we hold three significant concerns about long-term impacts to this reduction in revenue for the state. 

Concern #1: The Governor’s plan leaves out about one-third of Missouri taxpayers, including many of those who need relief the most. 

According to our partners at the Missouri Budget Project, the wealthiest 1% of Missourians would receive $6,024 worth of tax relief on average, while the lowest income Missourians would receive just $11 from the Governor’s proposal. Older Missourians who rely solely on social security income, retired teachers who depend on state pensions, and working families with low-wages may earn too little money to owe income taxes, but they contribute significant portions of their income to state general revenue in sales and property taxes. If our leaders are set on reducing taxes, a more equitable approach would be to make cuts to property taxes and sales taxes. Sales tax, in particular, is highly regressive and has a disproportionate impact on low-income families. 

The Missouri Budget Project has come up with an alternative plan that would eliminate Missouri’s flawed business income deduction, strengthen Missouri’s Working Families Credit and enhance Circuit Breaker Tax Credit to reach the Missourians left behind in the Governor’s proposal. This plan would decrease the state’s revenue by an estimated $586 million annually, significantly less than the Governor’s plan, while still achieving the core intention of providing tax relief to Missouri families. Empower Missouri fully endorses this plan. Read more here.

Concern #2: Missouri’s administration of safety net programs is already severely underfunded.

Most of the social safety programs available to families earning low wages in Missouri are largely or fully funded by the federal government, but the state bears responsibility for administering them. There are countless examples of how Missouri is failing on that front every day. Empower is currently a plaintiff in a lawsuit against Missouri’s Department of Social Services (DSS) asserting that the state is depriving eligible households from accessing SNAP benefits in violation of federal law. A federal report last week showed that Missouri’s Department of Health & Senior Services (DHSS) ranks at or near the bottom nationally in terms of processing Medicaid applications in the federally-permitted time. A 2016 National Institute for Early Education Research report showed that only 19% of eligible three- and four-year-olds in Missouri were enrolled in Head Start. According to the USDA, only about 50% of pregnant women, postpartum mothers and children 0-4 who are eligible for nutrition assistance through the federal WIC (women, infants, & children) program access this benefit in Missouri. 

Missouri could and should choose to invest more money in the administration of these programs to ensure that all Missourians get the assistance they need. DSS and DHSS are chronically understaffed, primarily due to the fact that Missouri pays poverty wages to its employees. According to data analysis by the St. Louis Post-Dispatch, the median salary for a DSS employee last year was $36,694.  For context, the federal poverty line for a family of four is $27,750.  A family is eligible for SNAP (food stamps) at 130% of the federal poverty, which is $36,075.  Therefore, it is fair to assume that somewhere near half of the employees who staff the agency responsible for approving food stamps for Missourians are actually eligible for food stamps themselves. 

Concern #3: A healthy, vibrant society is predicated on everyone having the opportunity to thrive.

According to a 2019 analysis by the Missouri Budget Project, Missouri’s investment in government services is severely lacking compared to other states. The analysis found that Missouri’s per capita investment in the state public health budget was the lowest in the nation. Missouri ranked 45th in the nation in per capita state fiscal support for higher education and 46th in the nation in state revenue dedicated per K-12 student. Our starting teacher salary remains one of the lowest in the nation. According to the United Health Foundation, Missouri ranks 45th in the nation in the adequacy of policies designed to support seniors. And, according to the National Women’s Law Center, Missouri has the 8th lowest eligibility for child care assistance in the nation.  

Each and every one of these statistics represents a set of government services where we should be investing more, not less. By not investing in this key infrastructure, we are going to further exacerbate the wealth gap across the state, which heavily dictates quality of life for Missouri families. Those with resources will pay for private schools, pay out of pocket for healthcare expenses, and take care of elderly family members through private means. But all Missourians deserve quality education, healthcare, and senior services, and our government has the means to provide these services that enhance quality of life for all of us– regardless of if we are utilizing the services or not.  So why would we sacrifice a healthy, vibrant society for all in order to keep $1771 extra for ourselves each year? 

Rather than cutting taxes, Missouri would be better served by investing in the hard-working individuals who make up our state government and deepening our investment in core government services, such as education, public health, & senior services. Raising wages for state employees puts money back directly back into our economy while decreasing dependency on safety net programs. Investing in schools leads to a more educated workforce, building prosperity for families and communities. Public health spending decreases tax dollars spent treating preventable, chronic conditions and increases community well-being. Senior services ensure that our elders get the care and respect they deserve.  We implore the legislature to consider balancing a desire to cut taxes with a need to invest in the people of Missouri.

1$177 is the estimated tax savings for families earning the median household income ($57,290) in Missouri under Governor Parson’s plan.

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