This article first appeared in the St. Louis Beacon, April 13, 2011 - Talk to Mel Hancock about the amendment to the Missouri Constitution that bears his name, and the conversation inevitably comes around to taxes, services and the state's national ranking in both.
To critics of the procedures his amendment and its progeny put into place, Missouri is suffering because lawmakers' hands are tied if they want to increase taxes and have a more robust budget to meet the state's needs.
Hancock doesn't see it that way.
"What's wrong with being one of the lowest tax states in the union?" the 81-year-old former congressman said in a recent telephone interview from his home in southwest Missouri. "I don't think that's insulting. I think that's an indication that we've got some smart people in Missouri.
"The measure of whether government is doing its job is whether it is providing necessary services that people can't provide for themselves, and doing it for the least cost. I haven't heard anybody complaining about being low-taxed except for a few people who are living on tax dollars and depend on tax dollars for their own personal welfare. They don't want any restrictions."
If Hancock hasn't heard anyone complaining about Missouri's relatively low taxes -- not to mention the revenue they bring in and the services they pay for -- he may not be listening to the right people. The relationship between low taxes and poor national rankings has been the subject of debate for decades, as the state consistently is rated in the lower 20 percent of the nation in any number of measures.
In many respects, anyone in Missouri who tries to increase the pool of money available for public services has to tread a fine line. On one hand, they have to take some measure of pride in how the state is doing, even as they seek more money so it can do better. But that two-pronged approach risks raising the response: Why should we pay higher taxes when we are already doing well at a bargain price?
Most recently, Donald Phares, professor emeritus of economics and public policy at the University of Missouri-St. Louis, used 58 variables to measure where the state ranks in a wide range of revenue and spending indexes. His study led him to this stark conclusion in a commentary published in the Beacon in mid-March:
"Turning attention to the state's finances, revenues and spending, the picture is 'dismal.'"
In a recent interview, he expanded on that view, noting that given the Hancock restrictions, it is very hard to raise revenue for anything except the most specific reasons, and even then the effort is not easy.
"If it's for general revenue," Phares said, "forget it. If it's something specific people want, maybe."
In a broader sense, adds Robert Cropf, who chairs the department of public policy studies at Saint Louis University, the Missouri experience echoes a feeling nationwide that has been exploited by the tea party and other political figures who have found that it is popular and fruitful to campaign against government and the services it provides.
"The goal of Hancock and all other tax and spend limitations is to shrink government," Cropf says, "but the demand for government services still grows.
"That's one of the ironies of public policy. People always say cut my taxes and cut spending on wasteful programs. But when it comes to their programs, it's not wasteful. It's necessary spending."
A Balanced Approach
Missourians' fiscal conservatism is reflected not only in the Hancock restrictions but in the state constitution's requirement that the budget in Jefferson City must be balanced every year.
The constitution also requires Missouri to maintain an emergency fund of 7.5 percent of the previous year's revenue, according to Linda Luebbering, the state's budget director. The legislature has the power to increase that amount up to 10 percent, she said.
Since the Great Recession hit in 2008, budget cuts totaling in the hundreds of millions of dollars have been required to maintain the constitutionally required balance, as state revenue declined dramatically because of sharp drops in tax collections. Though the state's income has turned around so far this year more than forecast, and revenue is projected to run far ahead of the earlier prediction of a 3.6 percent increase, no one is likely to go on a spending spree.
That kind of conservatism helps the state's ability to borrow money, Luebbering said, noting that Missouri is one of just a handful of what are known as triple-triple states -- those with a AAA bond rating from all three rating agencies.
"Do they take into consideration the impact of Hancock?" Luebbering said. "Absolutely they do, but it's only one of many things they look at."
Another big part of the mix is what could be considered a classic Show-Me attitude when it comes to taxing and spending. In the eyes of Terry Jones, political science professor at UMSL and a longtime student of state government, it may be going too far to call Missourians outlook anti-tax.
"We are not an anti-tax state as much as we are suspicious about taxation," Jones says. "Give us a good reason about what the money is going for, particularly at the local level, and more often than not we say yes."
Noting that polls have shown that 25-30 percent of Missourians are against any taxes at all, Jones says that leaves a large segment of voters still open to convincing arguments.
"We have 70 percent who are willing to listen," he said. "Almost all of them want to know what the taxes are going for."
That situation means that advocates for certain causes and services have a big job ahead of them.
"Those successful at getting something passed get funded," says Mark Tranel, a colleague of Jones at UMSL's Public Policy Research Center. "Those who don't are out of luck."
A Lonely Crusade
One of those whose efforts have fallen short but who keeps plugging away with her message about the need for more tax money to fund vital services is Rep. Jeanette Mott Oxford, D-St. Louis.
Noting that the state is about $4 billion below the original Hancock lid, she says the state has plenty of room to increase revenue. To refuse to do so, she says, means "condemning ourselves to mediocrity."
"We are not apt to rebound to where we were in 2008 for another five years," Oxford said. "We have to make adequate investment in things from public education to how we care for senior citizens if we want to have excellence in this state."
She argues that it is stellar services, not low taxes, that will help bring Missouri out of the recession.
"The promise has been, if we get taxes low enough, we'll have nirvana in Missouri. We'll have all these jobs and everything will be humming along. But why do we have 10 percent unemployment? If this is the key to success, why hasn't it worked yet?
"I just think that's not right. I think creating businesses is about excellence -- excellence in education, excellence in the amenities we can offer. But that requires investment, and we're not willing to make that investment."
The vehicle she would use to make that investment happen is House Bill 637, which Oxford projects would raise $1.3 billion by modernizing tax tables, cutting taxes for those in the bottom 60 percent and making the richest 20 percent of Missourians pay the same amount of their incomes, as a percentage, that is now paid by the other 80 percent.
She notes that 20 percent of the money raised would be dollars that otherwise go to Washington because of the deductions and offsets that are part of the federal and state structures.
Not surprisingly, her plan is stuck in neutral.
"When we try to discuss this," Oxford says, "people just say, 'Oh, that's a billion-dollar tax increase.' There's no discussion of it, with the governor and the speaker of the House saying we're not going to talk about it, it's not going to pass. If it's not going to pass, people like you won't write about it, and it becomes a self-fulfilling prophecy.
"As long as we stay on this shallow, half-inch-deep discussion level, folks have a knee-jerk reaction to the word 'taxes.' Legislators working to get a change find it practically impossible, without an informed population and a vigorous discussion. Instead, we get well-financed groups raising the specter of Grandma and Grandpa having to eat cat food or all of our jobs moving out of state unless we do X, Y and Z. Discussion is not happening, and we need to make it happen."
Her approach gets support from Tom Kruckemeyer, chief economist for the Missouri Budget Project, who spent a large part of his career working in the Department of Revenue.
"Different people get different levels of satisfaction from state services," he says. " If you ask the 100,000 people who have been kicked off the Medicaid roles, they wouldn't be happy. In the last 10 years, tuition at the state's public universities has gone up about 88 percent, and I don't think many people would think that would be a good thing.
"Others may feel that is just fine because it doesn't directly affect them. Obviously, reasonable people can disagree on whether this is a good or bad thing."
In an ideal world, Kruckemeyer adds, changes to Missouri's basic tax structure would bring more fairness -- and more revenue.
"If I was king of the world, I'd note that the state hasn't raised its basic income tax brackets in 40 years, so that is overdue. Pie in the sky, the state would be well served by reworking the income tax to make it more progressive. But obviously, the current political climate is firmly in the anti-tax camp. There doesn't seem to be much interest in what I would regard as fairly innocuous increases, like tobacco or alcohol taxes."
Are Low Taxes a Magnet?
Not everyone thinks higher taxes would be good for the state, of course.
Ed Robb has a triple perspective on the question. As an economics professor at the University of Missouri-Columbia, he was a veteran observer of state finances. As a two-term member of the Missouri House, he had the chance to get involved in the debate firsthand.
Now, as presiding commissioner of Boone County, plus a consultant, he deals on a more intimate level with the sometimes thorny issues of balancing payment for services and pleasing constituents who want the most from their money.
He says that all St. Louis area residents have to do to see the wisdom of Missouri's careful financial ways is look across the Mississippi River.
"Missouri is in a position to benefit substantially from its conservative fiscal stance," Robb says. "Why would anyone want to invest in the state of Illinois now?"
Like many others, he points to states like Texas, Florida and Tennessee as the places where big economic growth is occurring -- and as places that have no state income tax. When firms look to relocate, he said, taxes are a definite factor.
"I have yet to talk to potential investors who are not interested in what kinds of tax incentives we can provide, at the state or local level," Robb said. "You need to be able to play, or you are not going to get that investment or the jobs that come with it. The alternative is for these companies simply to go overseas."
That outlook, he added, is why legislators have begun taking a harder look at the taxes levied on businesses compared with those levied on individuals.
"As an economist," Robb said, "I have always been certain that companies don't pay taxes in the long term. It's the job of the individuals who own or manage those companies to keep that liability as small as possible, because that increases the rate of return to the corporation. That's just a given."
And lawmakers need to be sensitive to which kinds of taxes voters find more palatable, says Steve Ehlmann, a former GOP leader in the Missouri Senate who is now county executive in St. Charles County.
"When the economy was growing by leaps and bounds, and more and more people were moving to St. Charles county and spending more and more dollars, we were getting up to a 10, 11, 12 percent increase in sales tax receipts," Ehlmann said.
"What our council did was go ahead and cut the property tax rate because that's what everybody hated. Now, 61 percent of our budget is relying on sales tax, and that's going down every year. We could go ahead and reimpose the property tax, but that is so unpopular, we would never do it."
So are Missourians satisfied with the status quo?
"If you look at the history of tax initiatives," says Robb, "either by petition or put forward by legislators and put to a vote of the people, the answer would be that the people are satisfied. And that is the only evidence we have."
Taxing Times, Taxing Questions
So with the resurgence of the anti-tax, anti-government sentiment that gave rise to the Hancock amendment in the first place, back in 1980, what are the chances that Missouri voters -- who ultimately hold the purse strings -- would vote to boost the taxes that they pay?
The key, say political observers, is how directly they can see the benefits from whatever money they send to government officials. Taxes earmarked for a specific purpose are more likely to win approval than general increases; local taxes are more likely to get passed than ones statewide.
"It ends up limiting public policy," says UMSL's Tranel, "or leads to people making proposals that they don't understand the impact of. That, I think, you could trace back directly to Hancock."
"Voters are more likely to vote for public schools, maybe law enforcement, maybe economic development," adds David Valentine, who formerly directed research in the Missouri Senate and now teaches at the school of public affairs at the University of Missouri-Columbia. "But would they vote for money to maintain the state prison system? No. Money for public assistance? Probably not.
"That's the big limitation at the state level. I think this is much stronger, much more intense, and much less concerned about consequences. Looking back on it, Mel Hancock seems pretty mild. People didn't think that at the time."
For Cropf at Saint Louis U., the issue becomes broader, one about the basic relationship between government officials and the people who elect them.
"We have had 30 years of politicians who have failed to do what they are supposed to do," Cropf says. "Voters are averse to fiscal reality, but it's not entirely the voters' fault. Politicians encourage this, saying they can cut taxes and at the same time provide a high level of services. It makes politicians reluctant to propose any programs that involve any additional spending."
Even, he adds, if spending money now means spending less in the future.
"That's what investments are all about," he says. "If we want to prevent dropouts and spend $100 million the first year, it may be slow to show results. But in the long run it may save much more money in kids who are not dropping out, not going to prison, not having unwanted pregnancies and are actually paying taxes."
Still, for better or worse, Cropf doesn't expect the anti-tax dynamic to change any time soon, primarily because of some well-known examples.
"I think when people talk about tax increases, they think of what happened to Walter Mondale or George H.W. Bush when they talked about higher taxes," Cropf said. "But sometimes, you have to raise taxes. You should be able to explain that, and let the voters decide.
"Look at what happened to Bill Clinton. He raised taxes in his first term and he was re-elected by a landslide. It's not always clear that raising taxes is the same as signing your death warrant."