Cross-Border Tax Skirmish Between Missouri and Kansas

Kansas City, Missouri and Kansas City, Kansas are separated by a river, and a good number of people cross that river daily to live in one state and work in the other. Many end up filing tax returns in both states, and to minimize economic distortions, both states allowed the other’s residents to take the same property tax deduction when itemizing.

Earlier this year, Missouri repealed the deduction for nonresident taxpayers, seeking to grab a few million dollars even if it hindered interstate travel and commerce.

Rep. Kenny Wilk of Kansas demands that Missouri rescind the tax increase on out-of-staters or else his state will retaliate:

Said Wilk: “You recognize our laws and we recognize yours. If you disagree we will tax your people.”

Wilk, according to a recent Associated Press story, is planning to fast-track tax legislation, once drafted, through the House in January. The idea is that if Missouri fails to revoke its legislation in January, Wilk will proceed with the bill.

Time and again, we see states eager to shift tax burdens to out-of-state residents. But since all of us are an out-of-state resident in 49 states, the higher taxes can quickly get out of control. The Supreme Court has restricted such taxes in limited contexts, such as with charging sales tax on mail-order purchases in the Quill case, but otherwise there’s little stopping states except common sense, even in the face of threatened retaliations.