Executive Branch

Nixon touts credit agency’s concerns over tax cut bill

by  • 

– Gov. Jay Nixon warned Monday that Missouri’s AAA credit rating could be in harm’s way if lawmakers move forward with an override of proposed income tax legislation.

In a letter to the General Assembly and twin visits to St. Louis and Kansas City, Nixon cited a report by ratings agency Standard and Poor’s claiming that if lawmakers enact House Bill 253, it could have a “significantly negative impact on the state’s finances under certain circumstances.”

“These findings mark a significant departure from the positive view of Missouri’s fiscal stability previously offered by the rating agencies and provide further evidence that House Bill 253 could imperil our long-standing AAA credit rating if it were to be come law,” Nixon wrote.

Nixon also highlighted reports from Fitch Ratings and Moody’s investors service claiming that if HB 253 were to be enacted, they may reevaluate the state’s credit rating, which has been at AAA – the highest rating available – since 1989.

A downgrade could mean higher interest rates for the state on its debts. Nixon said in his letter that the AAA rating actually saved the state $72 million this year when it refinanced outstanding debt at a lower interest rate.

The agencies’ concerns were mostly rooted in the potential for the state to be liable for some $1.2 billion in retroactive tax breaks if the U.S. Congress were to enact the federal Marketplace Fairness Act of 2013. Citing his own concern over the issue, Nixon has already withheld some $400 million from the fiscal year 2014 budget.

As written, the bill would gradually reduce income taxes by half a percent for all Missourians over ten years. By 2017, it would allow individuals to deduct 50 percent of business income and reduce corporate income taxes by 3 percent over the next decade. The legislation includes triggers based on the state pulling more revenue than the year prior.

Lawmakers reconvene on September 11 to consider some 29 bills Nixon vetoed. It is unclear whether Republicans in favor of the tax cut bill have 109 votes to override Nixon’s veto. 100 Republicans originally supported the bill, with six members absent and three voting “no.”