Wed June 5, 2013
How The Income Tax Cut Issue Extends Beyond Nixon's Veto - And His State
Governor Jay Nixon vetoed legislation Wednesday that would have cut Missouri’s income tax rates for the first time in 90 years.
The Republican-led General Assembly passed the bill in large part pointing to neighboring Kansas which already has slashed its personal and corporate income taxes.
But as St. Louis Public Radio’s Maria Altman reports, the Democratic governor says the cuts would hurt Missouri education and other state services.
A 'Fiscally Irresponsible Experiment'
Just hours after vetoing the proposed tax cut, Governor Nixon was in Kansas City, surrounded by educators, business leaders, and advocates for seniors and children. He was greeted by applause.
After the applause died down he explained why he did it.
“House Bill 253 is an ill-conceived, fiscally irresponsible experiment that would jeopardize funding for vital public services," Nixon said.
The Democrat argues Missouri is already a low-tax state and that Republican-proposed cuts would gouge the state’s budget.
Legislative researchers estimate the cuts would mean $700 million less in state revenue when fully implemented in 10 years.
Nixon’s administration puts it at $800 million a year. What does that equal?
"$800 million is the equivalent of eliminating all public support for higher education. All of it… or closing all of our prisons or shutting down the entire Department of Mental Health," Nixon said.
But Could Tax Cuts Actually Help?
House Speaker Tim Jones, a Republican from Eureka, argues tax cuts would not hurt general revenue, but actually help.
“I believe that lowering the tax burden on Missouri’s job creators, businesses and individuals incentivizes them to create more jobs than simply a tax increase...," Jones said. "I believe it will create more growth in our economy."
And he says that with Kansas lowering its tax rate right next door, the move is essential to keep business in Missouri.
What The Bill Proposed
- Business owners would get up to a 50 percent deduction for income on their individual tax returns in five years.
- Corporations would see their tax rate cut in half - to a little more than 3 percent when fully implemented.
- And for you and me? Our tax rate would go down about 1.5 percent over the next decade, to 5.5 percent.
The Missouri Budget Project, a progressive economic watchdog, opposed the bill so strongly this year it actually bought a radio ad.
"…some politicians seem to think that calling their radical tax reform makes it ok. It’s not…" the ad says.
Director Amy Blouin says the bill’s tax savings would mostly go to millionaires.
She says 40 percent of Missourians would get just $20 more a year and that it’s not much better for businesses.
"We’re talking on average a business might get on average an $8,000 tax benefit per year," Blouin says. "That’s not enough for them to make up for all the training they’re going to have to provide to their workforce as Missouri cuts our education structure.”
Blouin argues corporations look at education and transportation infrastructure when they decide where to locate.
Taxes? Not so much.
Staying In Missouri - And Big Money's Role
But Patrick Ishmael, a policy analyst with the conservative think tank the Show Me Institute, says taxes make a big difference.
“If I’m a business and I have an opportunity to retain more of my own money and I know other states are not as competitive as the state of Missouri is I’m going to be more inclined to move to the state of Missouri," Ishmael said. "And if I’m in the state of Missouri I’m going to be more inclined to stay.”
Cutting the income tax is a pet project of the Institute’s founder and funder, wealthy St. Louisan Rex Sinquefield.
He’s acknowledged he gave money in Kansas and Oklahoma to push the issue in those states.
A Lasting Debate
And the debate over tax cuts in Missouri isn’t likely to go away.
House Bill 253 passed with a veto-proof majority in the Senate and just six votes shy of a super majority in the House.
There were seven Republican representatives who missed that vote and several members of the GOP say they’ll attempt to override the governor’s veto.
Follow Maria Altman on Twitter: @radioaltman