Missouri at an economic crossroads

A single mom working two jobs with an unexpected tax bill. A doctor having to say "no" to new Medicaid patients because of lower reimbursement rates. An entrepreneur facing a maze of regulatory red tape before he can hire his first employee. These are the people suffering from Missouri's stagnant economy. These are the people who want bold policy reforms, not more of the same leadership from Gov. Nixon.

These are the same Missourians who are moving to other states where legislators are passing massive tax relief and eliminating unnecessary regulations.

If you want to see how bad things have become, check out the American Legislative Exchange Council's recently released Rich States, Poor States, which summarizes the signs of Missouri's economic decline. Here's the painful facts: Missouri is 40th in economic performance, 39th in personal income tax progressivity, 34th in the personal income tax rate, and those are just the worst.

Among many bad policies, Missouri's economy languishes under an outdated tax code that imposes one of the highest marginal rates in the Midwest. Recently a nonpartisan research think tank released a study showing Missouri has the 14th highest state and local sales-tax rates in the nation -- and now recent actions by the legislature would bring the sales tax to sixth highest in the nation. Five states don't collect a statewide sales tax and 12 states don't allow local governments to levy sales taxes. Yet we continue to pursue higher taxes on the state and local level. Earlier this month, local governments proposed more than 260 tax increases, further expanding the combined tax burden.

Missourians are getting nickeled and dimed at every level of government. The result is that the Show Me State is showing overtaxed Missourians the door, as seen in the IRS's migration data.

One of the Internal Revenue Service's few good functions is tracking the migration of Americans' income tax returns that cross state lines, showing the number of people and income that cross state lines. Their data is sobering: from 1992 to 2010, Missouri lost $1.38 billion in annual adjusted gross income (AGI). AGI is the starting point in calculating most people's taxable income.

This $1.38 billion of lost wealth is traveling to more economically friendly states like Florida, Texas and North Carolina -- states which have substantially lower taxes. People vote with their feet. Interstate migration from 2000 to 2009 showed that the 10 states with the lowest tax burden gained more than 2.8 million new residents. The 10 states with the highest tax burdens lost more than 4.2 million people over the same period of time. People are looking for states that don't tax their citizens out of house and home.

Americans are flocking to Florida and Texas because of their low tax burden. North Carolina is attracting new citizens by recently passed legislation which slashes taxes by $2.5 billion over five years. Similarly, Indiana's tax cuts and right to work law is attracting new residents and investment. Michigan erected an "open for business" sign when it became a right to work state.

Now, I don't want to be unfair: There are folks moving to Missouri. What's interesting is that they are coming from broke states like Californian and Illinois -- states with disastrous tax rates and out-of-control spending. Missouri stands at the crossroads between two directions: Do we go the way of North Carolina or California?

Missouri needs meaningful tax relief, spending cap legislation to keep the tax burden from rising in the future, continued rejection of Medicaid expansion, worker freedom protections such as right to work, elimination of unnecessary regulations on small businesses, and a culture that encourages our local taxing agencies to stop demanding that taxpayers fund their spending habit.

The Show Me State can continue to go down the path of higher taxes, bigger government, more regulation and excessive spending. Or we can follow other states down the path to prosperity; where government is limited, regulations are checked, spending is capped, energy is inexpensive, and work is encouraged. It's up to Gov. Nixon to show the way.

Patrick Werner is the Missouri state director of Americans for Prosperity.