Missouri Senate passes tax cut and credits, House passes its own tax credit bill
Missouri House members will meet next week to consider two Senate bills passed on Wednesday: a permanent income tax cut and an agriculture bill that includes a set of tax credits.
The Missouri Senate voted 24-4 to pass the tax cut and 26-4 for the agriculture tax credits. They now go to the House for consideration.
Senators also approved emergency clauses for each bill, meaning they would go into effect as soon as Gov. Mike Parson signed them into law.
The bills are a result of Parson’s call for a special session. He wanted lawmakers to make changes to two bills that he ended up vetoing after the last general session.
The former bill containing the agriculture tax credits had a sunset date of two years, while Parson wanted six. The governor vetoed another bill that gave tax relief in the form of a one-time, nonrefundable income tax credit, saying he wanted more permanent tax relief that applied to more Missourians.
While the bills the Senate passed meet some of Parson’s requirements, they differ in other ways, with some significant changes. The bill containing the tax credits now contains additional language on other agriculture issues that would require Parson to widen the scope of the call for a special session in order to sign it.
The income tax cut, which is estimated to cost Missouri $950 million, also makes changes to what the governor initially wanted. Instead of a new top income tax rate of 4.8%, the bill only drops the rate to 4.95% in the new year. The 4.8% could be achieved in 2024 depending on state revenue collection.
But the rate could even go even lower, to 4.5%, over the years depending on another set of economic triggers.
The bill also does not raise the standard deduction like Parson wanted.
Sen. Lincoln Hough, R-Springfield, carried the bill in the Senate. He said they have had conversations with both the House and the governor’s office on the changes.
“My hope would be that folks see this as a responsible, measured approach to a continued reduction in these taxes,” Hough said.
In a statement, Amy Blouin, president and CEO of the Missouri Budget Project, criticized the bill and said the tax cut skews to help the wealthy as opposed to a middle-class family. According to the organization, a family making $52,000 annually would only save $5.50 each month.
“To address this disparity, policymakers should strengthen the earned income tax credit, a tax credit specifically for workers with low wages,” Blouin said.
Blouin also said the cut will decrease the state revenue by $1 billion each year.
The tax cut ended up receiving a few “yes” votes from Senate Democrats, including Senate Minority Leader John Rizzo, D-Independence.
“This tax cut [in] the way it was done is the least damaging that could have been done, especially when you consider some of the proposals that we heard yesterday going to zero like Kansas,” Rizzo said.
Sen. Brian Williams, D-University City, the assistant minority floor leader, voted against the legislation and said the state should be spending money in other areas like teacher pay.
“That's where my focus is, it really isn't focused on a tax cut for wealthy people,” Williams said.
Senate Majority Leader Caleb Rowden, R-Columbia, said the conversation on the budget shouldn’t be how much money there is, but what should be prioritized.
“At the end of the day, every year we come in and we have a finite amount of money and we prioritize the things that we prioritize,” Rowden said. “The question I would ask the folks who are pushing the other direction is how much money is enough?”
While those bills now await action from the House of Representatives, members of that chamber passed their own version of the tax credit bill on Wednesday.
House members voted 83-28 to pass the bill to the Senate, though 20 members ended up voting “present.” A vote to add an emergency clause later failed.
The bill faced some pushback from Democrats, not only on the bill itself, but over the process of it passing the chamber. Lawmakers perfected it Wednesday morning, only to finally pass it the same afternoon. Normally those processes are separated by at least one day.
Rep. Peter Merideth, D-St. Louis, also spoke on the bill making it out of the Fiscal Review committee.
“I guess it looked like maybe they didn't have the votes to pass it, and so at the very last minute, members were added — members, including the bill sponsor, to make sure that it passed,” Merideth said.
Merideth also expressed concern over the bill itself and said that even though he really liked parts of it, he didn’t clearly know who benefited from the bill and who didn’t.
Rep. Brad Pollitt, R-Sedalia, who sponsored the bill, defended it on the House floor.
“There's good stuff in here. I think that it gives the small businesses, the small farms an opportunity to compete in that arena with the big farms and the big businesses,” Pollitt said.
In addition to passing the tax credit bill, the House also wrapped up its work on the annual veto session, where no vetoes were overturned in either chamber.
While Rep. Shane Roden, R-Cedar Hill, initially sought to overturn a line-item veto in the bill containing American Rescue Plan dollars, he eventually withdrew his motion.
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