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Tax cut struggle resumes in Missouri

Updated: 2014-01-25T04:33:37Z

By JASON HANCOCK

The Star’s Jefferson City correspondent

— Republicans didn’t waste any time in sending a message to Gov. Jay Nixon.

The governor made it clear in a speech to a joint session of the General Assembly this week that any bill that seeks to slash Missouri’s income tax would be dead on arrival.

Just two days later, a nearly $1 billion tax cut was quickly approved by a Senate committee, opening the door for the full Senate to vote on the measure as early as next week.

The vote cements the battle lines for another contentious showdown between Republican lawmakers and the Democratic governor over whether Missouri needs to respond to massive tax cuts enacted two years ago in Kansas.

The struggle promises to rage for months to come.

For his part, Nixon remains defiant.

“I just do not believe a $1 billion risky experiment tax cut is the best way to build the economy of the future,” Nixon told reporters Thursday at a stop in St. Louis.

Republicans, who last year were unable to muster enough support to override Nixon’s veto of a similar tax cut proposal, remain undeterred.

“It is time for our governor to understand what Missourians know: Reducing tax burdens creates growth and prosperity for all,” said House Speaker Tim Jones, a Eureka Republican.

The Senate bill 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. An existing $2,100 personal deduction on income taxes for those who earn less than $20,000 would also be increased.

Once fully phased in, legislative researchers estimate, the bill will cost about $900 million.

“We’re returning taxpayer dollars to taxpayers in a sensible, responsible way,” said Sen. Will Kraus, a Lee’s Summit Republican sponsoring the tax cut legislation.

Proponents of the idea were inspired, at least in part, by tax reductions enacted in Kansas. Over the past two years, Kansas has exempted the owners of 191,000 businesses from income taxes and sliced its tax rates for individuals.

Missouri Republicans warn of an exodus of businesses from the Show-Me State if lawmakers do nothing. The state’s economy will suffer, they contend, without tax relief.

“The Senate proposals are a small step in the right direction, but the state would be better served with deeper tax cuts,” said Patrick Ishmael, policy analyst for the Show-Me Institute, a free-market think tank based in St. Louis. “Tax policy and tax rates matter.”

Critics of the idea argue that Missouri is already a low-tax state and that Kansas has struggled with falling revenue since their tax cuts went into effect.

Missouri can ill afford to follow Kansas’ example, they argue, at a time when the public school funding formula is still short around $600 million, higher education is receiving $100 million less in state support than it did a decade ago and the state continues to struggle to fund a crumbling infrastructure system.

“The fact is, tax cuts don’t create jobs or grow the economy, but they do starve us of the resources we really need to compete,” said Amy Blouin, executive director of the Missouri Budget Project, a nonprofit group that analyzes how fiscal policies affect low-income families.

Last year, after vetoing a Republican-backed tax cut, Nixon barnstormed the state with a coalition of education groups to rally opposition to the bill.

Despite Republicans holding 109 seats in the Missouri House — the exact number needed to override a veto — Nixon’s veto was sustained when 15 GOP lawmakers broke ranks and joined him in opposing the bill.

Chances for tax cut proponents to change the dynamic this year were set back when Nixon appointed one of those 15 Republicans to an open seat on the state parole board, a move that cost the GOP its super majority.

That doesn’t mean the appetite for tax cuts has lessened among Republicans. In addition to the Senate bill, House Republicans have held hearings on several tax proposals of their own.

Republican leaders have made it clear that this is a fight they are ready for.

“Just last month, the General Assembly voted for a $1.7 billion tax break for one company,” Kraus said, pointing to a Nixon-supported incentive package aimed at convincing Boeing Co. to build its new jetliner in St. Louis. “It’s time we gave the same attention to the people of Missouri.”

To reach Jason Hancock, call 573-634-3565 or send email to jhancock@kcstar.com.

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