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Opinion: Tax credits are a bad idea and also unconstitutional

  

As if on cue, the Federal Bureau of Labor Statistics released its Consumer Price Index report on the eve of Wednesday’s “special interest” session of the Missouri General Assembly.

Governor Parson called the session to help Missouri’s 460,000 citizens in agriculture related jobs, the 95,000 farms, and “all Missouri families [who] are impacted by agriculture, and the costs of food, fuel, and other household goods [which] have increased over 8.5% in the past twelve months, adding to the financial strain placed on farmers and families.”

Well, the 8.5% inflation rate is old news – the  Federal Bureau of Labor Statistics says that the “food at home index” rose by a whopping 13.5% over the last 12 months.

The Governor is right about the need for relief, but, unfortunately his approach to meeting those needs will only make matters worse for most of us. 

What’s more, the tax credits for select favored entities are prohibited by the Missouri Constitution.

Now, understand that the ag tax credits under consideration are not across the board tax relief for everyone. Instead, they are a form of mercantilism (aka, crony capitalism, or corporatism) that benefits the chosen few.

We could compose a much longer explanation of the counter-productivity of tax credits than anyone would want to read, but the short of it is that tax credit for things like bio-fuels contribute to the inflation the Governor is, appropriately, trying to address.

 Those of us in the ranching business are especially hit with the higher costs of feed, fertilizer, and equipment that directly results from the bio-fuel subsidies, and food costs go up for everyone.

Yes, government meddling in what’s supposed to be a free-market results in all sorts of unintended consequences. One of those consequences impacts the future of family farms in the state in a very disturbing way: The subsidies drive up the cost of land and other agriculture inputs to the point that it is virtually impossible for a young family to start their own farm.

UNCONSTITUTIONAL

State legislators should not even have to do the above analysis, though, since the proposed tax credits are blatantly unconstitutional.

Article III, Section 38(a) states, “The general assembly shall have no power to grant public money or property, or lend or authorize the lending of public credit,to any private person, association or corporation…”

And Section 39(5). says, “The general assembly shall not have power: (5) To release or extinguish or to authorize the releasing or extinguishing, in whole or in part, without consideration, the indebtedness, liability or obligation of any corporation or individual due this state or any county or municipal corporation…”

The plain reading of the Constitution matters more that the opinion of some court, but (someone correct me if I am wrong)  Curchin v. Missouri Indus. Development Bd., MO Supreme Court 1987  is the latest on-point Missouri Supreme Court case on this matter, and that court wrote, “Accordingly, in our application of Article III, Section 38(a) of the Missouri Constitution, we have held grants with a primarily private effect to be unconstitutional, despite the possible beneficial impact upon the economy of the locality and of the state.” 

COURT-IMPOSED IMPEDIMENTS TO JUDICIAL REVIEW

So, one might ask, if these type of tax credits are so clearly unconstitutional, why have they not been knocked down in court?

The answer may be in a 2011 case called MANZARA v. State, in which the Court denied standing to sue to the plaintiffs, Barbara Manzara and Keith Marquard, because of  what Judge Wolff called “a flawed economic and legal analysis” of standards for judicially imposed limits on standing.

In his own opinion in that case, Judge Wolff wrote in frustration: 

“…it is interesting to see the good uses that the well-connected with their lobbyists can find for state government, which raises again the question: Should the state government’s financial favors bestowed through tax credits be beyond the reach of judicial review under the Missouri Constitution?”

Missouri legislators have a duty to do what the courts will not do. They must take their oath seriously and apply the plain meaning of the Constitution’s prohibition of granting public money or extinguishing  debt of individuals or corporations.

WHAT SHOULD BE DONE TO ADDRESS VERY REAL PROBLEMS?

Following the Constitution does not hamstring the General Assembly.  The Governor has identified very real problems they can provide very real solutions to.

– Eliminate All Taxes on Food

The Governor’s calls for meaningful cut to the income tax are laudable, so long as they are significantly larger cuts than are already called for in statute and by the Hancock Amendment.

Perhaps even more important than maximizing an income tax cut, taxes on food should be eliminated.

Inflation hurts those on a fixed income and retired folks living off the nest egg they worked their whole lives for.  An income tax cut is of little use to folks with no income!

The one tax cut that helps everyone would be the elimination of all taxes on food.

– Get Government Out of the Way of Agriculture

For example, the Governor was, again, right to identify the very real problem of a shortage of meat processing plants, especially in-state facilities. His tax-credit proposal is the wrong approach, though.

Instead of picking a few winners and lots of losers, why not make everyone a winner by getting state and federal government out of the way by deregulating the meat packing business.

State law should allow ranchers to process and sell their own products to willing buyers without jumping through local, state, and federal hoops.

Principled legislators can turn this “special interest” session into one of the most meaningful experiences in their legislative careers if they will adhere to the Constitution and free-market principles.