Battling back against tax cuts in neighboring Kansas is once again a top priority for Missouri Republicans.
And if they run into another veto by Gov. Jay Nixon, they might just turn directly to the voters.
State Sen. Will Kraus, R-Lee’s Summit, has once again filed a proposal that would phase in a 50 percent deduction for business income reported on individual income tax returns over five years. It also would gradually cut the state’s top individual income tax rate of 6 percent to 5 percent over a decade, with each year’s reduction taking place only if yearly state revenue grows by at least $100 million.
The legislation would also increase an existing $2,100 personal deduction on income taxes by $1,000 for individuals who earn less than $20,000 of adjusted gross income.
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Kraus estimates that the annual cost of his bill would be more than $1 billion when fully implemented.
Supporters warn of an exodus of businesses out of Missouri if lawmakers do nothing. The state’s economy will suffer, they argue, without tax relief.
“When you put money back into the hands of individuals and business owners, they spend it,” Krause said. “They put it back into the economy, and it helps create jobs.”
During the 2013 session, the Republican-dominated General Assembly passed a tax cut that was vetoed by Nixon, who said it would “undermine our state’s fiscal health and jeopardize basic funding for education and vital public services.”
The governor campaigned around the state against the tax cut bill all summer, aided by a coalition of groups representing school boards, teachers, labor unions and some of the largest employers in the Kansas City area.
In the end, a handful of Republicans joined with Democrats to sustain Nixon’s veto in the Missouri House, killing the bill’s chances.
The new version of Kraus’ bill no longer includes a provision cutting the corporate income tax rate or creating a tax amnesty period meant to entice delinquent taxpayers to finally pay up.
Critics of the 2013 bill are once again lining up to pan Kraus’ latest proposal.
“This is just trying to address a problem that Missouri doesn’t have,” said Amy Blouin, executive director of the Missouri Budget Project, a nonprofit group that analyzes how fiscal policies affect low- and middle-income families. “Taxes here are not high compared to other states, and businesses are some of the first to say that.”
The state’s public school funding formula is still short around $600 million, Blouin said, and higher education is receiving $100 million less in state support than it did a decade ago.
Additionally, the state continues to struggle to fund a crumbling infrastructure system, from roads and bridges to state buildings.
Kraus called his bill starting point, and “I am more than willing to sit down with Democrats and the governor and try to find some compromise we can all live with.”
“I think there’s a path forward if we’re willing to work together,” Kraus said. “And if not, there are already groups looking at the possibility of putting the issue directly on the ballot.”
The group Grow Missouri – which sprung up last summer to build support to override Nixon’s veto and is primarily funded by retired financier Rex Sinquefield – has filed several proposed initiative petitions with the secretary of state’s office aimed at reducing taxes.
But while the battles from the 2013 session could once again dominate 2014, Sen. John Lamping, a Ladue Republican, has proposed an alternative.
He’s sponsoring a bill that would give a $400 per child tax credit for married couples who earn up to $92,000 a year or individuals who earn up to $46,100 a year.
“Ask yourself who is struggling the most in our society right now? Middle class families,” Lamping said. “This is tax relief targeted to the Missourians who need it the most.”
Lamping estimates his bill would cost anywhere between $280 million to $320 million annually.
Blouin said her organization is excited about Lamping’s proposal.
“We like that it’s targeted to helping families who really need it,” she said. “There are a few tweaks we’d like to make, but we’re hoping this is the direction that the tax debate goes during the next session.”
The legislative session begins Jan. 8.