A $620 million tax cut approved by Missouri lawmakers in 2014 doesn’t even kick in until next year.
But at least one Republican thinks it’s time to double it.
Sen. Eric Schmitt, a St. Louis County Republican who is running for state treasurer, has sponsored a bill to increase the size of the 2014 tax cut to more than $1 billion.
Just two years after the GOP-dominated General Assembly and Democratic Gov. Jay Nixon battled over tax cuts — with Republicans voting to override the governor’s veto and force the cuts into law — whether another showdown looms on the horizon isn’t clear.
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But Schmitt says the time is right, and he’s optimistic his colleagues will come on board.
“When I started filing tax cut bills six, seven years ago, they didn’t get a lot of traction,” he said Thursday after a public hearing on his bill by the Senate Ways and Means Committee. “But a lot has changed. It’s a good sign that I got a hearing so early in the session.”
Opponents of the idea point westward to Kansas, where lawmakers passed income tax cuts in 2012 and 2013 that were followed by massive budget shortfalls. A budget-balancing plan was recently approved, aimed at a $200 million deficit for the next fiscal year.
Oklahoma, which also passed tax cuts in 2014, is another example opponents cite. Lawmakers in that state are facing a projected deficit of more than $1 billion in next year’s budget.
Cutting taxes shouldn’t be the priority when the public school funding formula in Missouri is still hundreds of millions of dollars short and the state continues to struggle to fund a crumbling infrastructure system, said Amy Blouin, executive director of the liberal Missouri Budget Project.
She also noted that unlike Kansas, Missouri’s constitution mandates any tax increase be placed on the ballot and voted on by the people. Passing a tax increase of any kind in Missouri has proved highly difficult in recent years, she said.
“So down the road, if we discover that we’ve made a mistake, it will be very difficult to do anything to make up that revenue,” Blouin said.
Schmitt’s bill would reduce the top personal income rate from 6 percent to 5 percent, instead of the 5.5 percent enacted by the 2014 tax-cut bill. A 25 percent deduction for business income reported on individual income tax returns in the 2014 bill would increase to 50 percent.
Each of these cuts phases in over five years, but only if state revenues increase by $150 million each year.
The phased-in approach is “the responsible way to do this,” Schmitt said. Critics like to point to the cost of the tax cuts, Schmitt said, “but there is a cost to doing nothing.”
“Especially on the western side of the state,” he said. “It’s naive for us to assume a dry cleaner on the eastern side of State Line Road won’t consider moving to the western side of State Line Road if he can save money every year on taxes.”
Patrick Ishmael, a policy analyst at the conservative Show-Me Institute, said that while a bigger tax cut that is phased in faster would be preferable, Schmitt’s bill is “a modest and responsible step in the right direction.”
“Policymakers should be returning tax money back to the families who pay the taxes rather than redistributing it to government cronies through tax credits and other tax incentives,” Ishmael said.
Testifying Thursday morning in support of Schmitt’s legislation were Associated Industries of Missouri, the Missouri Retailers Association, the Missouri Grocers Association and the National Federation of Independent Business.
When Nixon vetoed the 2014 bill, he estimated 52 percent of the benefits would go to the richest 7 percent of taxpayers. A family making the state median income of $44,000 would only get a $32 cut.
Jeanette Mott Oxford, executive director of Empower Missouri, said that instead of looking at further tax cuts, lawmakers should focus their energy on addressing the chronic issues facing the state and those living in poverty.
“Probably all of us have concerns that our infant mortality rate is as high as it is, that our hunger rate is as high as it is,” she said. “I think we’d all like to fund public education. We share those concerns.”