February 8, 2013

Not All Ideas Are Bad — Some Are Actually Good

You might think that all I do is complain about bad ideas coming out of Jefferson City. For the most part, you would be correct. However, on occasion, I do compliment good ideas when I see them. Take, for example, Missouri House Bill 380. HB 380 would completely eliminate the tax on pass-through entities and introduce a $100 million cap on economic development tax credits.

I have written a lot about the need to respond to Kansas’ tax cut. By eliminating the tax on pass-through entities, many Missouri businesses would be able to keep more of their money to invest in new projects and even lower prices for customers. In addition, it would not only make Missouri more attractive to businesses outside the state, it would also serve as an incentive for in-state businesses to remain here. HB 380 would partially mitigate any projected revenue shortfall by placing a cap on economic development tax credits. If the plan had been in place last year, the cap would have saved the state more than $300 million.

Even if there was not a proposed tax cut in HB 380, the proposed tax credit cap in the measure is, in and of itself, a good idea. Getting the government less involved in picking winners and losers through the tax code is a worthy goal. By substantially cutting down on the number of credits that will be issued, the government’s involvement in economic development is substantially diminished. Coupling a cap with an elimination of the tax on pass-through entities makes the bill even better. There is a lot to like in HB 380 and I hope Missouri experiences some kind of tax relief.

My colleague Patrick Ishmael and I just released a new paper on the topic of pass-through entities, “Passing Through Missouri: Left Behind On Taxes?” You can read the paper here.

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