By KRISTINA RASMUSSEN & TRAVIS H. BROWN
A historic measure to cut taxes in Missouri passed Tuesday, and it should be a reminder to Illinois Gov. Pat Quinn that his own plans to increase income taxes will have real consequences for Illinois' future economic competitiveness.
With final votes of 109-46 in the state House and 23-8 in the state Senate, the Missouri legislature overrode Gov. Jay Nixon's second attempt to veto income-tax-cutting legislation.
This victory will see the top marginal income tax rate decrease to 5.5 percent from 6 percent, and will provide small businesses a 25 percent exemption from income taxes. The package could deliver as much as $620 million in tax relief to hard-working Missourians.
The passage of Senate Bill 509 marked the first time in almost 100 years that the Missouri legislature reduced the income tax rate.
That's a stark contrast to what's happening on the Illinois side of the Mississippi River, where Quinn and his allies in the House and Senate appear hell-bent on breaking their promise to taxpayers that the record 2011 state income tax increase would be temporary.
Even though Quinn will have had three years and more than $31 billion in new revenue to balance the budget, the state's fiscal condition is still a mess. Lawmakers are resorting to shameless scare tactics to bully a continuation of the tax increase -- which costs the typical family an extra $1,000 each year -- through the legislature. Give us more money, they're threatening, or we'll shut off the poison control hotline and kick Grandma out of the nursing home.
The passage of a pro-growth tax cut on Illinois' western border makes any vote at the Statehouse in Springfield to make the tax increase permanent even more difficult.
To be sure, Illinois still has Missouri beat on the income tax rate. Illinois taxes income at 5 percent; this rate is slated to go down to 3.75 percent at the beginning of 2015, should lawmakers stick with the tax increase sunset plan on the books. Illinois also benefits from a fair, "flat" income tax, which treats everyone equally, while Missouri has a "progressive" tax that is unfair to many taxpayers.
However, a more comprehensive look at the cost of government to residents shows that Missouri's overall state and local tax burden is lower than what Illinois residents face. In fact, Illinois has the 13th-highest burden nationwide while Missouri is 18th lowest in the nation, according to the nonpartisan Tax Foundation.
Tax burdens matter, but so does the general policy direction that state leaders intend to take.
In Missouri, state legislators took a bold stand and were able to insist on pro-growth economic reforms despite the governor's objection; in Illinois, residents face flip-flopping and promise-breaking.
If you were looking to make a long-term investment for locating a business or building a new home, which would you pick?
The truth is that neither state can afford to continue with business as usual.
Both Missouri and Illinois are net "exporters" of people, according to the latest statistics. That means more people are leaving even after counting the people who move into the state.
Yet between the two, Illinois is losing.
Between 1995 and 2010, Illinois sustained a net loss of 34,474 people to Missouri, losing out on $660 million in annual income.
In 2010 alone -- the most recent year of Internal Revenue Service data -- Illinois lost a net of 2,308 people and $54 million in income to Missouri.
Illinois needs to step up its game if it wants to win the battle for people and investment, not only with its neighbors but also with the rest of the country and even international players.
Missouri has shown the way, if Illinois lawmakers are willing to borrow a page or two from the Show-Me State's playbook.
Kristina Rasmussen is executive vice president of the Illinois Policy Institute and lives in Springfield. Travis H. Brown is the author of "How Money Walks" and a policy leader in Missouri.