Letter to the Editor: Tax cuts lead to ‘revenue miracle’ for state

Dear editor,

Over the last eight years, Republicans have been leading the effort to reduce income taxes in Missouri. In 2017, corporate income tax rates were reduced from 6% to 4.25% and in 2018, Republicans reduced the individual income tax rates from 6% in 2017 to 4.95% in 2023. Then in 2023, they eliminated income taxes on Social Security benefits.

The total estimated amount cut from 2017 to 2023 was $897 million. Despite that, Missouri’s revenues have increased! Back in 2020, those cuts totaled around 10% of the General Revenue budget. However, our revenue collections have continued to increase, and now those cuts are just 6.6% of our GR collections. Our state has experienced an unbelievable 51.7% increase in our GR collections since 2020, from $8.9 billion in 2020 to $13.2 billion in 2023.

Clearly, capitalism and the free enterprise system is working in Missouri!

In FY2024, nearly half of the state’s revenue came from federal funds. During and after the COVID crisis, the federal government sent billions of dollars to the states. In Missouri, Republicans have primarily used those funds for one-time expendatures like roads, bridges, buildings and other nonongoing items. Using these funds to invest in infastructure will greatly benefit our state and ensure we do not become dependent on federal funds that will be reduced and eliminated in the future. Republicans have wisely avoided using federal funds to pay for ongoing programs.

Missouri’s budget has grown from $27 billion in FY 2016 to $52.9 billion in FY 2024, with steep increases starting in FY 2020. Much has been said about the budget almost doubling in the last five years, but a significant portion of the increase has come from the massive influx of federal dollars sent to us by Washington. Republicans in the House understand those funds will be reduced soon, which is why they fought to lower FY2025 spending by $1.2 billion from the FY2024 budget. This was the first time the budget has been decreased since FY2012. Additionally, the FY2025 budget leaves a $1.5 billion savings surplus for a rainy day. 

What has happened to Missouri’s revenues after cutting taxes the last few years is exactly what happened to federal revenues when Presidents Kennedy, Reagan and Clinton implemented tax cuts. Each time our leaders cut taxes the economy strengthened, allowing business and individuals to spend and invest more of their dollars back into the economy, which increased tax collections. Despite Missouri “losing” almost $1 billion each year in “lost” revenue from tax cuts, we are collecting over $4.5 billion more a year because our citizens are reinvesting the money they have kept in their pockets.

The good news is, these tax cuts have led to a “revenue miracle” for Missouri, and it looks like our economy will keep running strong. Gov. Mike Parson just announced we added 16,700 jobs in April, and Missouri was the No. 1 state for net job growth in America. Cutting taxes and spending wisely has always been a great recipe for economic growth. These numbers show Art Laffer was correct when he said, “Lower tax rates make people work harder, save more, invest more, learn more, and ultimately earn more.”

—Dean Plocher, speaker of the Missouri House