JEFFERSON CITY, Mo. —
Another year has brought yet another tax-cut fight between Democratic Gov. Jay Nixon and the Republican-led Missouri General Assembly, and on Tuesday, Nixon announced that he had found what he sees as a fatal flaw.
Last week, the Missouri House sent Nixon a pared back, $620 million tax-cut proposal that would cut income taxes for individuals by 0.5 percent and allow a 25 percent deduction for business income on personal tax returns, phased in by 2017. The bill was supported by all of the Joplin’s area lawmakers in both chambers of the General Assembly.
Nixon pointed to a provision of the bill that he believes would eliminate taxes on income above $9,000.
“Once this legislation is fully phased in, the top bracket ‘shall be eliminated,’” Nixon said, referring to the provision in the bill. “With the simple stroke of my pen, this bill would separate Missouri from every state in our nation as the only state to not be able to meet the basic demands.”
Republicans in the state disagree with Nixon’s argument. They pointed to an analysis provided to lawmakers by former Missouri Chief Justice William Ray Price, siding against Nixon’s opinion.
“I believe the governor is living in a fantasy world,” said Rep. Charlie Davis, R-Webb City. “I believe the accusations he is making are totally false. This provides some well-deserved tax relief for all Missourians and all Missouri businesses.”
When last year’s proposal was brought up during the September veto session in an override attempt, 15 Republicans joined Democrats in sustaining Nixon’s veto. They noted “unintended” tax increases on prescription drugs and textbooks, as well as the potential impact of the federal government possibly implementing an online sales tax. Those provisions were stripped from this year’s bill, and the Republicans who opposed it came out in favor of this year’s proposal.
Another change in strategy: the timing. This year’s tax-cut fight will be compressed into just a couple of weeks. The state constitution mandates that Nixon decide on the bill by May 1, before the Legislature leaves in mid-May, at which point the Legislature could attempt to override his action. The bill passed with 108 votes in the House, just one short of the requirement to overturn a governor’s decision. Even if the one Democrat who supported the bill last week were to flip, only two of the Republicans who were absent would have to vote in favor. (Those who were absent included Rep. T.J. Berry, R-Kearney, the sponsor of last year’s tax bill.)
Earlier this year, Nixon had given his initial support to the idea of a tax cut. He said any tax cut he would sign would need to be contingent on full funding of the K-12 education foundation formula and on lowered caps on the state’s most expensive tax credit programs. He dropped his support when those provisions were removed.
“He wants to nitpick,” said House Majority Floor Leader John Diehl, R-St. Louis. “This is a smaller, simpler bill that clearly addresses his concerns.”
Rep. Bill White, R-Joplin, said this year’s tax cut is “a lot cleaner.” He said he was happy that some of the controversial components from last year’s bill had been removed.
“This is pretty straightforward,” he said. “It’s a well-thought-out proposal.”
Aside from his new fatal flaw, Nixon also is relying heavily on his playbook against last year’s bill in his opposition to this year’s version. On Thursday, his administration pointed to numbers provided by the Missouri School Boards’ Association showing cuts for local schools if the bill is enacted. For Joplin, the association believes the measure could mean $2.12 million in reduced revenue from the state. Other potential cuts included $1.5 million for Carthage and $1.3 million for Webb City.
Supporters of the bill have shrugged off that line of criticism. The bill includes a provision that would make its enactment contingent on state revenues being $150 million higher than the highest total of the three previous years. The legislation also would require the state’s income tax brackets to be adjusted annually for inflation, resulting in lower revenue, and would provide an additional $500 tax deduction on top of the state’s current $2,100 deduction for residents with incomes below $20,000.
“Those numbers (cited by opponents) assume there is going to be no positive ramifications from giving people a tax cut,” White said. “That’s been shown historically not to be the case. I don’t buy his (Nixon’s) numbers and hope the people look at what he’s doing and saying. The numbers he is using are wrong.”
The tax-cut proposal comes as lawmakers are also considering several proposals to raise revenues in other ways. In fact, just last week, the Legislature passed a measure to ask voters to raise sales taxes by $800 million to fund infrastructure projects, as the Missouri Department of Transportation has issued dire warnings about the future of transportation funding in the state without action from the Legislature. Lawmakers are also considering authorizing millions of dollars in bonds for state building projects.
“The majority in the Legislature has voted to raise sales taxes, to borrow money for unnecessary building projects, allowed wasteful tax credit expenditures, and launched an all-out attack on public education,” Nixon said.
White said the proposals are not incompatible, and that he would vote for the sales tax increase if it were placed on the ballot.
“There are different revenue streams,” he said. “Our gas tax isn’t doing what people thought it would be doing. When that gas tax was decided as how we were going to be funding roads, cars didn’t get 30 mpg. Transportation money doesn’t traditionally come from general revenue — it is its own revenue stream with a lot of federal money.”
THE TAX-CUT LEGISLATION is Senate Bill 509.