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State lawmakers are considering several proposals to eliminate Missouri’s corporate income tax, under the mistaken assumption that doing so would incentivize business growth or attract new businesses to Missouri. But evidence shows that there is little to no correlation between corporate tax rates and business location decisions.

In fact, in a recent survey of corporate executives and location consultants, access to major markets and availability of skilled labor were ranked as the top influencers of corporate location and expansion decisions. Tax rates didn’t even make the top five list.

Beyond the survey is real life evidence:

• Missouri’s corporate income tax is already at the bottom of the nation – only one state has a corporate income tax rate that is lower than Missouri’s rate of 4%.
  
• If corporate tax rates were a primary concern of businesses, Missouri would already be overflowing with business growth – we’d have businesses knocking down our doors to enter the state.

But they aren’t – and that’s because businesses consider a variety of factors when making expansion and location decisions.

• Factors like trained labor, the size of the customer base, and access to transportation hubs all matter to businesses to a much higher degree than state taxes.
  
• Further, business growth is increasingly in the entrepreneurial sector, founded by individuals who can often locate anywhere. For these folks, aspects of the quality of life in a state mean much more than the corporate income tax rate.

And all of those things – skilled labor, transportation, and quality of life – depend on state revenue and public services to support them.

Through the state’s education and highway infrastructures, our park systems, and services that nurture safe and healthy communities, we create an environment where workers and families want to live and where companies can grow to meet the natural demand of a thriving community.

Eliminating the corporate income tax would take a big bite out of the state’s ability to provide those basic public services and damage our ability to attract and retain businesses and jobs.

• In context, eliminating the corporate income tax would cost more than $700 million per year – three-fourths of the total amount of funding Missouri contributes to higher education, four-year colleges and universities, two-year community colleges and technical schools, each year.

Rather than eliminate the corporate income tax, Missouri would do better using the revenue to invest in its workers and communities. The bills under consideration include Senate Bills 93 and 135, House Bills 660 and 816.

At the end of the 2022 state legislative session lawmakers approved House Bill 2090, to provide “economic recovery” payments to Missourians.  Intended to help families meet the rising cost of inflation, the bill had a fundamental flaw in that it would leave out more than one-third of Missouri taxpayers, including families earning low wages and seniors who rely on Social Security income.

Governor Parson should veto the bill, which would allow the state to instead invest the funding in the services and infrastructure would create an inclusive recovery.

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Paid family leave benefits both workers and employers by allowing employees to address the caregiving needs of their family without losing their jobs or ability to pay their bills and by reducing employer costs associated with high turnover, low worker retention, and decreased productivity.

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This analysis provides a fiscal estimate of a proposal to provide paid leave to St. Louis City employees. The proposed policy would provide:

• 12 weeks paid parental leave for the birth, adoption, or foster care placement of a child.
  
• 4 weeks of paid caregiver leave for a spouse, parent, or child (which are existing FMLA categories) as well as additional eligibility to care for an in-law or parent of a domestic partner, grandparent, or a sibling with a serious health condition.
  
• 2 weeks of paid military deployment leave for a “qualifying exigency” related to military deployment of a spouse, child, or parent such as making alternative child care arrangements, attending certain military ceremonies, and making financial or legal arrangements.

The table below provides an overview of the estimated costs to St. Louis City to provide paid family leave. We find that expanding paid family leave to St. Louis City workers would cost approximately $1.05 million in wages annually, but would also be offset by significant cost savings in the form of reduced turnover, improved worker retention, & increased productivity.

Cost of Paid Family Leave

Type of Family Leave	Estimated Annual Leave Requests	Average Weekly Wage	Proposed Weeks of Paid Leave	Annual Cost Per Employee	Annual Cost of Paid Family Leave
Birth, Adoption, Foster Care	44	$1,004.80	12	$12,057.60	$530,534.40
Caregiving for Family Member	128	$1,004.80	4	$4,019.20	$514,457.60
Military Family Leave	2	$1,004.80	2	$2,009.60	$4,019.20
Total	174				$1,049,011.20

Savings from Paid Family Leave

Paid family leave is an investment in a modern workforce, but also an investment that helps an employer’s bottom line by allowing workers to continue to make productive contributions in the workplace while simultaneously fulfilling family care obligations.

Paid family leave has been shown to lead to significant savings for employers primarily by reducing employee turnover and boosting worker retention.  In fact, research has shown that access to paid family leave reduces the likelihood of new mothers leaving the labor force by 20%[i]. Rehiring and training a replacement represents a significant cost to employers and is estimated to cost approximately 21% of a lost employee’s annual salary[ii].

Paid family leave increases productivity and has little impact on daily operations. Research has shown that work-family benefits attract a higher quality workforce and reduce absenteeism and tardiness among workers, thereby increasing overall productivity[iii]. Further, 87% of employers in California reported a positive effect or no noticeable effect on business operations due to paid family leave and 91% report a positive effect or no noticeable effect on business profitability and performance upon instituting family leave.[iv]

American Rescue Plan

The American Rescue Plan (ARP) allocated nearly $440 million to St. Louis City that may be used to support efforts to bring the pandemic under control and to support economic stabilization for workers, households, businesses, and the public sector[v]. Paid family leave would meet these objectives by allowing workers the opportunity to provide care for family members without having to lose income as a result of that care. Local fiscal relief provided through ARP provides a unique opportunity to fund paid family leave for St. Louis City workers allowing St. Louis City to build a vibrant and competitive workforce.

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Methodology used for paid family leave estimates: Annual Leave Request estimates based on average annual new FMLA leave requests in 2019 & 2020 obtained from STL City Personnel Department adjusted for a 10.3% increase[vi] in uptake in caregiver leave to account for new categories of eligible care recipients; Average cost of one week of leave: average bi-weekly rate for salaried civil service employees obtained from STL City Personnel Department; Military deployment leave: Usage data for military leave are unavailable but uptake is expected to be quite low. Estimate assumes two employees taking leave annually.

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[i] Jones, K., & Wilcher, B. (2019). Reducing maternal labor market detachment: A role for paid family leave. American University Working Paper Series

[ii] Boushey, H., & Glynn, S. J. (2012). There are significant business costs to replacing employees. Center for American Progress, 16, 1-9.

[iii] Meyer, Christine Siegwarth, Swati Mukerjee, and Ann Sestero. “Work-family benefits: which ones maximize profits?.” Journal of managerial Issues (2001): 28-44.

[iv] Appelbaum, E., and R. Milkman. “Employer and worker experiences with paid family leave in California.” Leaves That Pay (2011): 1-32.

[v] U.S. Department of the Treasury. Coronavirus State and Local Fiscal Recovery Fund. Funding Objectives & Allocation for Metropolitan Cities. 

[vi] Missouri Budget Project analysis of average annual paid family care claims for recipients other than a spouse, parent, or child in FY2012-2021. State of California Employment Development Department: Paid Family Leave Program Statistics.

Thank you for your interest in this issue. This action is now complete, as the bill moved out of the House Budget Committee on Tuesday, April 19th.

We’re disappointed that lawmakers chose to leave one-third of Missourians out of proposed economic relief, despite expressing an intent to help families meet the rising cost of inflation. Moreover, the taxpayers who won’t get this rebate are the very ones who pay the highest portion of their income in state and local taxes.

While we oppose the legislation in its current form because it leaves out so many taxpayers, we’re hopeful that if it or other tax rebate proposals move forward in the remaining weeks, policymakers will prioritize – or at least include – the Missourians most struggling to afford gas and put food on the table.

Learn More: Economic Recovery Rebates Should Include All Missourians.

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A Missouri House proposal to provide economic recovery payments to Missourians intended to help families meet the rising cost of inflation would leave out one-third of Missouri taxpayers, including families earning low wages and seniors who rely on Social Security income.

By modifying the structure of this one-time economic recovery payment, lawmakers can greatly simplify administration of the credit and put money back in the hands of all Missourians, including those most impacted by the health and economic consequences of COVID.

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House Bill 3021 structures the economic recovery payment as a tax credit applied to income tax and would give single adults a credit of up to $500 and joint filers a credit of up to $1,000. However, the credit is limited depending on the income tax liability of the taxpayer. So, if a family’s income tax liability is $6, they would get $6; if a family’s income tax liability is $0, they would get $0.

This structure leaves behind many of the Missouri taxpayers most struggling afford to gas and to put food on the table, including families earning low wages and seniors with fixed incomes – while giving the largest rebates to Missourians with average incomes of $332,000 or higher.

While these folks are not likely to have a state income tax liability, they pay significant portions of their income in sales, property and other state and local taxes. In fact, according to the most recent analysis, Missouri families in the bottom quintile of income pay 9.9% of their income in state and local taxes, compared to just 6.2% for the wealthiest 1% of families.

The Missourians left out of the current version of the economic recovery payment are the very ones that are still struggling to recover from the COVID crisis while facing higher costs for food, gas, and other necessities. Further, as the costs for the food and gas and other necessities increase, the sales and excise taxes paid on those items have also increased, making it even harder for low-income Missourians to get by. 

By making the economic recovery payment refundable, lawmakers can include all Missourians, greatly simplify administration of the credit, and put money into the hands of the Missourians who need it the most.

For Immediate Release: April 13, 2022
Contact: Traci Gleason

Groups Encourage Lawmakers to Strengthen Economic Relief Proposal
Current Proposal Leaves Out Missourians Struggling to Make Ends Meet

A coalition of groups led by the Missouri Budget Project appreciate House leadership’s efforts to provide direct assistance to families as in House Bill 3021. However, the proposed one-time economy recovery payment that the House Budget Committee will hear today currently leaves out the very Missourians who most need it. Legislators have an opportunity to help an additional 400,000 Missouri households by making the credit refundable, providing a lifeline to Missourians struggling to make ends meet.

House Bill 3021 would provide a one-time economic recovery tax credit of up to $500 for individuals and up to $1,000 for married couples. However, at least 400,000 Missouri households whose pay is so low that they don’t owe income tax wouldn’t see any benefit – even though the total state and local taxes they pay make up a higher portion of their incomes than most taxpayers. What’s more, many of these Missourians are the very ones who were hit hardest by the pandemic and are still struggling to recover.  

“Missourians whose pay is so low that they don’t owe income tax are still paying taxes,” said Amy Blouin, President & CEO of the Missouri Budget Project. “In fact, the lower your earnings, the more you pay in state and local taxes as a share of what you make.”

According to the most recent analysis, Missouri families in the bottom quintile of income pay 9.9% of their income in state and local taxes, compared to just 6.2% for the wealthiest 1% of families.

“Many older adults have low enough incomes that they don’t owe income taxes,” said Jay Hardenbrook, Advocacy Director for AARP Missouri. “But they still pay sales taxes, they still pay property taxes, and they still pay gas taxes, all of which take a big bite of your budget when you have limited income.”

All Missourians are seeing increased costs for food, gas, and other products they need. As the costs of those goods increase, so do the associated sales taxes, which are applied as a percentage of the total.

What’s more, the economic fallout from COVID hit workers with low wages and families with fixed incomes the hardest, and many families are still trying to get back on their feet, with more than 30% of Missourians still reporting difficulty meeting their normal household expenses.

“The very households struggling the most with both rising costs and the consequences of the pandemic are left out of this relief,” Blouin continued. “We encourage Missouri lawmakers to modify this credit so that the Missourians most struggling to afford gas and put food on the table aren’t left behind.”

The pandemic particularly upended the lives and budgets of families with children, who are more likely to report challenges like not having enough to eat.

“Providing families with a one-time benefit would combat against rising household costs and ensure they are able to make ends meet,” said Craig Stevenson, Director of Policy & Advocacy for Kids Win Missouri. “We look forward to working with House Budget leaders in working towards refundability of the credit or adding an enhancement for those families with children, structured similar to the federal stimulus payments.” 

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Missouri Budget Project is a nonprofit public policy analysis organization that analyzes state budget, tax, and economic issues.

Join Our Team: The Missouri Budget Project (MBP) is now accepting applications for two State Policy Interns to contribute to our research on a range of substantive policy issues impacting low- and moderate-income Missourians. MBP seeks to expand the diversity of voices in state policy debates by identifying highly motivated candidates who have experience with communities that are traditionally underrepresented. Applications are due April 15 with anticipated start date of Summer 2022.

State Policy Interns are responsible for assisting in the production of objective, timely, and accessible research and analysis on state budget, tax, health and economic issues under the direction of the MBP Director of Research. The Interns will also engage with advocates, community groups, state department and/or legislative staff to help advance MBPs policy priorities.

State Policy Intern (Budget & Tax Focus): This internship focuses primarily on analysis and advocacy related to state budget and tax issues in Missouri. Interns will learn how to track Missouri’s budget process and will leave with a deeper understanding of Missouri’s tax structure as well as the programs funded through our tax & budget system. Interns applying for this position should have a background in demographic analysis, including analysis of secondary data from the Census Bureau and/or related sources.

State Policy Intern (Economic Justice Focus): This internship focuses primarily on economic justice and worker-centered priorities with a particular focus on applying a racial and ethnic equity lens to this work. Interns will contribute to the development of a shared policy agenda with input from grassroots and Black-led organizations across the state of Missouri. Interns applying for this position should have a background in economic analysis including analysis of secondary data from the Census Bureau, the BEA/DOL and/or related sources.

Position Overview: State Policy Internships will ideally begin in Summer 2022 and continue through Spring 2023 (~June 1-May 31) and are expected to contribute approximately 20 hours/week. MBP may consider consolidating positions into a one-year full-time fellowship for qualified candidates.

Candidates residing in all areas of Missouri are encouraged to apply.

Compensation: The positions will be compensated at a rate of $20 per hour. Reimbursement for travel and other related work expenses will be provided.

See the announcement below for more details, including position descriptions and application requirements.

More than 230,000 uninsured Missourians will gain health insurance through Medicaid expansion.

Thanks to our partners at Georgetown University Center for Children and Families, we know that 49 percent of those working without insurance are employed in the hospitality, retail, and health care and social assistance industries. These are cashiers, cooks, laborers and movers, maids and housekeeping staff who earn too much to qualify for current Medicaid coverage and too little to buy private insurance.

Many of them are essential workers that we have relied upon in some way during the pandemic. Now it’s our turn to help them get reliable, affordable health insurance so they can continue to do their jobs and care for their families. It’s time for Missouri to fully fund Medicaid expansion and extend health coverage to our state’s uninsured workers.

Where Do Missouri’s Uninsured Workers Live?

While uninsured working adults live in communities across the state, the 21 counties with the highest proportion of uninsured working adults are in rural parts of Missouri except for McDonald County. Hover over the map to check out the uninsured rate for working adults in your county.

Read the full profile of Missouri’s Low-Wage Uninsured Workers

This afternoon, Governor Parson laid out his budget priorities for the state budget year that begins July 1, 2021. MBP will analyze the specifics of the proposal in the coming days, but we are pleased that in his address, Governor Parson:

• Emphasized the need to level the playing field for bricks and mortar businesses by implementing the “Wayfair Fix” and “responsibly invest those revenues and provide new opportunities for our state.”

• Committed to implementing Medicaid expansion.

• Recommended full funding of K-12 schools through the $3.56 billion foundation formula.

• Requested funds for six new crisis stabilization centers to improve mental health access.

Through these and other investments in Missourians, we can make our state a better place to live, work, and play, and strengthen opportunity for future generations. We look forward to working with the legislature to help support these and other proposals – like a state earned income tax credit – that help achieve our mutual goals of improving the lives of all Missourians.