Once more, I am embarassed to be a citizen of Missouri. Shame on that Democrat who went along with the Republican’s tax cuts.
May 07, 2014 6:05 am •
JEFFERSON CITY • Republican legislators stood together and a lone Democrat bucked his party’s governor on Tuesday to give Missourians their first state income tax cut in nearly a century.
In the most far-reaching move since Republicans took control of the Legislature 12 years ago, the House mustered the two-thirds majority needed to override a veto by Gov. Jay Nixon, a Democrat.
Exuberant Republicans, who gathered in the ornate House Lounge after the vote, called the day historic.
“Today, we lived up to the promise to Missourians, to provide hardworking Missourians some of their money back so they can grow their families, their farms and their small businesses,” said House Speaker Tim Jones, R-Eureka.
The vote was 109-46, with Rep. Keith English, D-Florissant, walking into the chamber at the last moment to provide the pivotal vote. The Senate had voted for the override Monday on a straight party-line vote of 23-8.
Drama of the moment aside, the tax code changes will take effect gradually.
In five annual steps beginning in 2017, the bill will cut the state’s top personal income tax rate to 5.5 percent from 6 percent and provide a new 25 percent deduction for business income reported on individual returns.
The cuts will be implemented only if state general revenue grows by at least $150 million a year compared with the high-water mark of the previous three years.
English said in an interview that the tax cuts were needed to help small businesses grow and that the bill had safeguards to protect education. He contended that Nixon had spread “misinformation” about the bill.
Nixon, who has called the bill unaffordable, unfair and reckless, issued a subdued statement Tuesday, saying that it failed to protect education funding and threatened the state’s AAA bond rating.
In his veto message last week, Nixon portrayed the tax cut as benefiting the wealthy.
He said 52 percent of the tax savings would go to the top 7 percent of taxpayers. Meanwhile, a family making the median income of $44,000 a year would receive a tax cut of only $32, Nixon said.
The bill is projected to cut income taxes by $620 million a year by 2022, though Nixon has warned that the tab could be much higher.
The governor contends that unclear wording appears to get rid of state income taxes for about 2.5 million Missourians. He cited a line in the bill that says that the top income tax bracket — which applies to people earning more than $9,000 — will be eliminated.
House Majority Leader John Diehl, R-Town and Country, led the charge to marshal votes for the override. He called Nixon’s argument “laughable” and dismissed it as “scare tactics.” Diehl said Republicans had no plans to address the unclear provision by passing another bill this session.
Nixon’s argument did win one convert: Rep. Jeff Roorda, D-Barnhart. Roorda had backed the tax cut when it initially passed but voted Tuesday to sustain the governor’s veto. Roorda called the apparent elimination of the top tax bracket a “fatal flaw.”
Republicans used timing as their ally, passing the tax cut early enough in the session that they had time to consider the veto before they adjourn on May 16. That way, Nixon couldn’t campaign against the bill all summer, as he did last year when he fended off an override of a broader tax cut at the September veto session.
Legislative leaders said that delaying the tax cut’s impact until 2017 will allow time to fully fund the aid formula for K-12 public schools. They also touted the requirement that state general revenue must grow by $150 million a year before the incremental cuts are triggered.
Those changes helped the GOP win over the renegade Republicans who scuttled an override last year.
“This is a bill that is fair and responsible,” said Rep. Nate Walker, R-Kirksville, one of the former dissidents.
Critics said the trigger was inadequate.
Missouri needs $250 million a year in general revenue growth just to maintain current levels of service, according to a statement by the Missouri Budget Project. That analysis doesn’t count annual increases in the number of people who depend on various social programs. The budget project is a liberal-leaning organization that advocates for policies that help low- and moderate-income Missourians.
Other opponents questioned whether the bill was the first step in a bigger plan to replace income taxes with consumption taxes, a move long championed by political mega-donor Rex Sinquefield of St. Louis. They noted that the Legislature is advancing a sales tax increase to pay for transportation projects.
“It’s almost a little experiment,” part of an attempt by proponents to implement a tax shift, said Rep. Mike Colona, D-St. Louis.
Sinquefield made a fortune in the investment business in California, then returned to his native St. Louis about eight years ago. Since then, he has donated millions of dollars to politicians and issue-oriented campaigns aimed at revamping the tax code and public education.
Grow Missouri, a group partly funded by Sinquefield, praised the Legislature’s action Tuesday. Group treasurer Aaron Willard said the legislation “will go a long way toward helping stimulate Missouri’s economy.”
The tax cut’s backers said that many of Missouri’s neighboring states had cut their taxes in recent years and that Missouri must follow suit to compete.
“Half the states in the union have done this,” said Dan Mehan, president of the Missouri Chamber of Commerce and Industry. “We’re very happy.”
Brad Jones, who lobbies for the state arm of the National Federation of Independent Business, predicted that businesses would use the extra money to give employees raises or help pay rising health insurance costs.
“Any time you put money back into the hands of a small-business person, they take it and put it back in the business,” Jones said.
Even so, some said boosting the economy wasn’t the main goal. Rather, downsizing government is at the heart of the plan.
“The real fight here is how much does government need,” said Sen. Brad Lager, R-Savannah. Because the bill provides only a 25 percent tax deduction for business income, he said, it “is not an economic development tax cut. It is a limit-the-growth-of-government tax cut.”
The bill is SB509.