Attempting to keep pace with tax-cutting Kansas, Missouri senators on Wednesday night endorsed a plan to shave hundreds of millions of dollars off the income tax bills of businesses and residents.
But the tradeoff could be higher taxes for shopping at stores and online.
The legislation given preliminary approval by the Republican-led Senate could mark Missouri’s most significant overhaul of its tax policies in a couple of decades.
Republicans expressed hope that it would spur an economic revival — or at least keep businesses and residents from being lured across the state’s western border by the siren call of lower taxes.
Yet some Democrats called it “irresponsible,” noting that Kansas now faces a budget gap as a result of sweeping tax cuts that kicked in this year.
The Missouri legislation, which needs another vote to go to the House, would gradually reduce the state’s income tax rate by three-quarters of a percentage point over five years while gradually increasing the state sales tax by one-half of a percentage point over that same period.
In addition to an overall income tax cut for individuals and businesses, the new plan would roughly double Missouri’s current income tax deduction for people with adjusted gross incomes of less than $20,000 annually. The legislation also attempts to boost tax collections by tightening the requirements for when retailers must collect Missouri taxes and by joining a multistate compact that collects taxes from online sales.
The net effect could be a roughly $450 million reduction in state tax revenue, according to estimates from sponsor Will Kraus, a Lee’s Summit Republican.
Kraus said his plan doesn’t go as far as the one passed last year in Kansas, which cut income taxes without raising its sales taxes. But he said his bill could make Missouri more competitive with its neighbor.
“I’m trying to stop the bleeding. I’m trying to stop the businesses from fleeing into Kansas,” Kraus said.
But Senate Minority Leader Jolie Justus of Kansas City was among some Democrats calling the plan irresponsible.
“What good are all these businesses going to be if we have a bunch of uneducated, unhealthy citizens?” she asked.