Missouri representatives are headed back to Jefferson City early at the directive of Gov. Mike Parson – with used car sales and tax credits on the agenda.
During the special session beginning Sept. 9, lawmakers will likely enact legislation allowing Missourians to credit the sale of multiple vehicles toward the purchase of a new vehicle. That will revise the current law, which the Missouri Supreme Court provided an opinion on in July. In Kehlenbrink v. Director of Revenue, the court ruled the current law “unambiguously permits the sale proceeds of only one vehicle as a credit against the purchase price of a new vehicle for purposes of calculating sales tax.”
Parson argues the special session is “the right thing to do for the people of our state” to be “in line with the Department of Revenue’s prior practice and what consumers have come to expect,” according to a news release from the governor’s office.
I’d argue there are a number of more pressing challenges facing Missourians. Tax credits like these can wait.
Calling the special session to run concurrently with the veto session will cost taxpayers roughly $16,000, Parson has said. The governor rationalized the special session by saying if the court’s current ruling were to remain unchanged, it would “create a financial burden on Missouri taxpayers and unnecessary government red tape that we can proactively prevent.”
While it’s been pointed out in multiple news reports on the special session that this tax credit has been utilized primarily in rural Missouri, the issue doesn’t seem to rise to the level of a special session. Instead of using a special session – which by its nature allows for more focused deliberation among lawmakers – for more pressing and pervasive issues, it’s being used on a narrow issue that reduces taxes for Missourians who had previously been benefitting from a bad interpretation of the law.
While it’s unclear exactly how many people the upcoming ruling will impact, according to multiple news reports, the state’s DOR handles about 140,000 trade-in transactions a year and about 6%-10% involve multiple vehicles.
Let’s consider another pressing issue: poverty. In Springfield, roughly a quarter of our neighbors are living in poverty, according the U.S. Bureau of Labor Statistics. The federal poverty rate is defined as an annual household income of $25,750 or less for a family of four. Missourians voted to pass a stair-stepped minimum wage increase in November 2018, to put the state’s current minimum wage at $8.60 an hour. On Jan. 1, 2020, it will be $9.45 an hour.
So here’s the answer to poverty, right? Not really. As wages rise, government assistance drops. The phenomenon has been coined the cliff effect: A salary bump or better job creates more take home pay while eliminating the amount of public assistance a family is receiving.
Let’s say a family of four with one adult working full time and another working 15 hours a week is making $24,596, just under the poverty level. By Jan. 1, if their hours remain the same, that household would make just over $27,000. It’s a bump in pay, but it also sets in motion the loss of public assistance benefits that made that income “livable” in the first place.
Passing legislation to minimize the impact of the cliff effect should take priority among Missouri lawmakers. Our state is facing a worker shortage and our unemployment rate in Springfield is at 3%, according to the BLS. It’s probable that as employees realize they’ll lose such benefits as food stamps, child care credits and housing subsidies, they’ll request a reduction in hours. That’s a lose-lose situation.
Our state should incentivize its citizens to better themselves by striving for a promotion and going back to school to broaden their skills, and we are doing those things. But we must consider the ramifications. If you’ve never lived in poverty, you might not understand why an employee would turn down a raise.
At Springfield Business Journal’s final Economic Growth Survey forum held last month, nearly half of the business leaders in attendance said they hadn’t heard of the cliff effect before. Thankfully, Prosper Springfield’s Francine Pratt and state Rep. Crystal Quade, D-Springfield, agreed to join me for a live interview to shed some light on the issue. At the event, Quade shared about her legislation to begin to address the cliff effect. It’s a pilot program that allows for families’ child care benefits to taper, instead of dramatically be cut as soon as a certain income is reached.
I’d urge lawmakers to consider a special session or at least a serious focus in next year’s regular session to address the cliff effect. Quade has presented, without success, legislation that would support families. She described child care subsidies, which her bill specifically addresses, as “the biggest cliff” facing families. As Quade shared with me, in 2018, her plan passed through the budget committee 28-1. That’s no easy feat. Yet in the Republican-led legislature, it was not even brought to the floor in the 2019 session.
I’m glad the governor is concerned about financial burdens facing Missouri families. I just don’t think he’s focusing on the right issue in this special session.
Springfield Business Journal Features Editor Christine Temple can be reached at firstname.lastname@example.org.
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