A year after HB 253, legislature sends smaller tax cut to Nixon’s desk

JEFFERSON CITY, Mo. – The Missouri House sent legislation to Gov. Jay Nixon on Wednesday that supporters say could grow business, while Nixon and his supporters claim it would slash revenue for education.

The bill, sponsored by state Sen. Will Kraus, R-Lee’s Summit, would reduce the maximum tax rate on personal income by from 6 to 5.5 percent beginning in 2017 and allow a 25 percent deduction of business income on personal tax returns. Both provisions would be contingent on state revenues being $150 million higher than the highest of the three prior years.

Other provisions would require the state’s income tax brackets to be adjusted annually for inflation, resulting in lower revenue, and provide an additional $500 tax deduction on top of the state’s current $2,100 deduction for residents with incomes below $20,000.

The legislation passed with unanimous support from Republicans, as well as support from Rep. Jeff Roorda, a Democrat running in a competitive Senate race in a swing district in Jefferson County. His opponent, Republican Paul Wieland, also supported the bill.

The bill passed five votes short of the required 109 to override a gubernatorial veto. Five Republicans, including the sponsor of last year’s tax cut bill, were absent for the vote.

A united Republican leadership, joined by many of the Republicans who voted against the larger tax cut bill last year, told reporters on Wednesday that this year’s much scaled back proposal is much simpler than last year’s bill, and does not include many of the provisions opposed by Nixon during last year’s tax cut fight.

“He wants to nitpick,” said Majority Floor Leader John Diehl, R-St. Louis. “This smaller simpler bill that clearly addresses his concerns.”

Rep. Nate Walker, R-Kirksville, one of the first Republicans to announce his opposition to last year’s controversial House Bill 253, said he agreed.

“This is a much better and simpler bill,” he said, adding that he would vote to override any potential gubernatorial veto. “The other one had some tax increases.”

All but one of the Republicans who voted against House Bill 253 when it came up during last year’s veto session voted in favor of the bill. Rep. Sue Entlicher was absent for the vote.

Although Nixon waged a summerlong fight against the 2013 tax cuts, he has said publicly that he hoped to reach a deal this year, but that they would only earn his final support if certain conditions are met, including provisions for fully funding the K-12 foundation formula for education, including tax credit reform, and continued state revenue growth of $200 million annually.

Even though the bill is essentially half the size of the 2013 plan, Nixon said recently that he believes the latest proposal could still harm education funding, which is already nearly $600 million short of the foundation formula goal. Additionally, Nixon has said tax credit reform should still be part of the discussion. Both of the largest tax credit programs — the Low Income Housing Tax Credit and the Historical Development Tax Credit — were deemed bloated by Republican State Auditor Tom Schweich earlier this year.

Legislative researchers have said the potential impact of the Senate’s tax cut is projected at $620 million per year, but Amy Blouin, executive director of the Missouri Budget Project, an advocacy group that typically opposes policies that could lower state revenues, said earlier this month that her organization believes that the cut could cost as much as $799 million annually when fully implemented.

Leave a Reply