JEFFERSON CITY, Mo. —
For the second time in two years, Democratic Gov. Jay Nixon has vetoed a bill that would provide a tax cut for Missouri residents and businesses, citing potential harm to the state’s coffers and, in turn, public education.
The legislation, Senate Bill 509, would reduce the maximum tax rate on personal income from 6 percent to 5.5 percent in increments beginning in 2017 and would 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 level of the three previous years.
In all, the bill is projected to reduce state revenues by $620 million when fully implemented. In his veto message, Nixon said the bill is unaffordable, unfair to lower income Missourians, and could create “dangerous uncertainty” for the state’s AAA credit rating.
“You can’t punch a more than a half-billion hole in the budget without harming public services like education,” he said Thursday afternoon. “Under no scenario do our schools get the support they need.”
The bill was supported by all of the Joplin area lawmakers. Legislative leaders have pledged to bring the bill up in a veto override attempt before they end the session on May 16. It takes a two-thirds vote in each chamber of the Legislature to override a veto.
“I guess we could do it as soon as Monday,” said Senate Majority Floor Leader Ron Richard, R-Joplin, who controls what bills are brought up in the chamber. “We would bring it up as soon as we can.”
The Missouri School Boards’ Association, which opposed the bill, said it could mean a $233 million cut for education. Based on current budget circumstances, the association claims that Senate Bill 509 would cause nearly $1.5 million in cuts to school districts such as Webb City, Neosho and Carthage, and more than $2 million for Joplin schools.
Those numbers are disputed by House Republicans, who say the association’s figures reflect only the current budget and do not account for the revenue growth required before the tax cuts would go into effect. Their numbers, put together by Speaker Pro Tem Denny Hoskins, R-Warrensburg, claim a more than $300,000 increase for Carthage and Neosho, $279,000 more for Webb City, and nearly $448,000 more for Joplin.
“The governor is basing (his figures) 100 percent on the dollar amount of the cuts,” said Rep. Charlie Davis, R-Webb City. “He does not account for the $150 million annual increase we have to see, nor does he look at the economic activity and the increased revenue based on that activity. I don’t think we’re going to cut one single thing. It is going to be a matter of giving the increase in revenue to all of our programs.”
Aside from the education numbers, Nixon has claimed that the bill might include a flaw that he believes might eliminate the state’s income tax entirely. Ted Ardini, general counsel to the governor’s office, pointed to a section of the bill that says, “The bracket for income subject to the top tax rate shall be eliminated once the top rate of tax has been reduced to five and one-half of a percent.”
“If your Missouri income is greater than $9,000, you’d have no tax bracket and no tax rate,” he said. “By the elimination of the over $9,000 tax bracket, there’s nowhere to go.”
Republicans have dismissed Nixon’s suggestion. “That’s laughable,” said House Majority Floor Leader John Diehl, R-St. Louis. “You don’t get to cherry-pick one sentence out of a multiple-page bill and ignore everything else in the bill. This is a diversion that’s intended to avoid talking about the real issue.”
Earlier in the year, Nixon had said he would be open to a proposal that was contingent on full funding of the K-12 school foundation formula, coupled with reforms to the state’s bloated tax credit programs. Davis, who owns a Joplin computer business, said he, too, is in favor of reforming the state’s tax credit code, but that politics is the art of compromise.
“I would love to see some of these tax credits that go to things and you see a low or negative return on investment,” Davis said. “Let’s work on a tax cut package and provide tax relief, and next year, if we have the opportunity, let’s do some tax credit reform.”
GOV. JAY NIXON’S VETO would likely be overridden in the Senate. In the House, Majority Floor Leader John Diehl, R-St. Louis, said Thursday that he thinks he has support from all 108 Republicans and at least one Democrat necessary to reach the 109 votes required to override Nixon.