Missouri Budget
4:42 pm
Thu May 1, 2014

Nixon Vetoes Tax Cut Bill, Calls It 'Dangerous Scheme'

As expected, Missouri Gov. Jay Nixon has vetoed Senate Bill 509, a tax-cut measure that he called “an unfair, unaffordable and dangerous scheme that would defund our schools, weaken our economy, and destabilize the strong foundation of fiscal discipline that we’ve worked so long and hard to build."

“This is a bad bill…and deep down, even the people who voted for it, know it,’’ said Nixon during a stop Thursday at Gateway/Hubert Wheeler School for the Disabled in St. Louis.  Nixon announced his plans to veto the bill, which officially took place a few hours later in Jefferson City.

Gov. Jay Nixon
Gov. Jay Nixon
Credit File photo

Among other things, the governor pointed to the latest news about Kansas’ dramatic tax cuts, which have prompted one of the major bond-rating services, Moody's Investors Service, to downgrade that state’s bond rating.

“In their rush to follow Kansas down the fiscally irresponsible path of eliminating ‘pass-through’ income for businesses, the General Assembly seems determined to put Missouri’s spotless AAA credit rating at risk,” Nixon said. “It’s time to set aside the partisan blinders and look at the evidence: Fiscal experiments like Senate Bill 509 do nothing to grow the economy and, in fact, cause it great harm.”

Nixon, a Democrat, then called on Republican legislative leaders to drop their planned attempts to override his veto and instead to focus on working with him on an acceptable compromise.

“I think you’ve got to transcend politics on this,’’ the governor said.

However, political battle lines already have formed.  Two business groups -- the Missouri Chamber of Commerce and Associated Industries of Missouri – swiftly issued statements in support of a veto override.

State Auditor Tom Schweich, a Republican who may run for governor in 2016, also quickly announced his support for a tax cut, although he didn’t single out SB 509.

“A tax cut will not only encourage business growth and employment, it will force state government to squeeze out the waste and fraud, which my office uncovers almost every day,”  Schweich said.

House Speaker Tim Jones, R-Eureka, said he wasn't surprised by the governor's action. This should serve as a reminder to the people of our state about the importance of having a Republican governor,”  Jones said.  “Our outdated tax code is pushing businesses out of Missouri and taking too much money from our state’s families, and this bill would help provide relief for Missourians and make our state a pro-growth state.”

Missouri Republican leaders are already trying to round up the votes for an override, which is expected to attempted before the session ends May 16. The House will need 109 votes, while the Senate will need 23.  Because the House has 108 Republicans, at least one Democratic vote will be needed.

House Majority Leader John Diehl, R-Town and Country, said during an appearance this week on St. Louis Public Radio's Politically Speaking podcast that he had the necessary Democratic support. He declined to identify the Democrat he was counting on.

The governor said his administration has begun to reach out to lawmakers in both parties but indicated that he planned to primarily appeal to the public.  "It's more important that we're talking to Missourians," he said.

Governor focuses on 'fatal flaw'

Nixon reaffirmed his chief fear that a provision in the bill – dubbed by his administration as “a fatal flaw” -- would eliminate the state’s income tax on all income above $9,000 a year, which would slash state revenue by 65 percent.

“It blows (the budget) up completely, setting up a fiscal catastrophe unlike anything we’ve ever seen,’’ Nixon said. He cited several additional legal experts who are siding with his interpretation.

But even the “best case scenario’’ outlined by the bill’s backers, the governor said, would cut $620 million a year from the state’s budget and force cuts in public education and other services.

Facilities like Gateway School, which cares for children with severe disabilities, would be among those affected, Nixon said.  He noted that the school is named for his late father-in-law, Hubert Wheeler.

Nixon said that SB 509’s tax-cut benefits are skewed toward the wealthy, with 52 percent of the tax cut going to Missourians with incomes in the top 7 percent.

As an example, he said, Missouri casino owners based in Las Vegas could trim 25 percent off their tax bill because they would qualify under tax-cut provisions aimed at “pass-through income’’ that would apply to certain Missouri casinos.  A casino owner with a $1 million annual income would see a state tax break of $18,000, the governor said.

Meanwhile, their middle-class workers would benefit far less, Nixon added.  By his administration's calculation, a family with an income of $44,000 a year -- Missouri's median income -- would receive a tax cut of only $32 when the legislation is fully implemented in 2022.

“That’s the equivalent of an oil change eight years from now,” the governor said.

Measure could end up in court

The business groups and Republican legislative leaders, including House Speaker Tim Jones, R-Eureka, dispute Nixon’s contention about the “fatal flaw’’ and have cited support from former state Supreme Court Judge Ray Price, who said that the bill's overall wording would prevent such a dramatic cut in income taxes.

But Nixon said that if the bill becomes law, the debate will certainly end up in court. 

He also noted that most of the General Assembly’s legislative leadership will be leaving office after this year because of term limits. That, he said, has led to some lawmakers focusing more on politics than policy. 

“They can just light the fuse and walk away,’’ the governor said, leaving any fiscal damage for others to clean up.

Nixon emphasized that legislators in Kansas City had to increase state taxes one year after their initial dramatic cuts, when it became clear that the state’s revenue had plummeted.

But Nixon noted that the Hancock Amendment in Missouri’s constitution would require a statewide vote to increase taxes to any significant degree, should SB 509’s provisions turn out be as bad as he fears.

The upshot would be “a fiscally irresponsible scheme,’’ said the governor, that would be “extremely difficult to undo.”

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