Tax cuts gone bad? Hey, not my problem

05/06/2014 12:02 PM

05/06/2014 6:27 PM

It is a fait accompli. A done deal. By the barest of margins, the Missouri General Assembly has overridden Gov. Jay Nixon’s veto of a bill that phases in income tax cuts.

Starting in 2017, businesses organized as “pass through” entities (meaning their owners declare the business income on their personal tax forms) will receive tax breaks that eventually will reach 25 percent. Tax rates for individuals will begin dropping until they reach one half of one percent. For most Missourians, that will amount to somewhere between $30 and $70 a year. That’s hardly the “welcome tax relief” supporters of the tax cut bill are boasting about, but it’s a hit of $600 million or more a year to the state’s budget each year.

Some quick thoughts on the bill and what happened over the last two days in Jefferson City:

• Republicans somehow co-opted a lone Democrat in the House, one Keith English of St. Louis County, to cast the deciding vote. I suspect Rep. English will lead a lonely existence in the General Assembly from here on out. I also suspect he has a major problem with Nixon that prompted him to abandon his party.

• Most of the legislators who just voted for the tax cuts won’t be in office when they’re fully phased in. If the state is struggling to fund schools or services, it won’t be their problem.

• The House floor leader, Republican John Diehl, wouldn’t permit debate on the bill on Wednesday. He said the hour-long discussion a day earlier would suffice. I’m sure it was enough for Diehl. Jon Carpenter, a freshman Democrat, was killing it in debate on Tuesday and still to come was veteran Democrat Rep. Chris Kelly, a lawyer who was prepared to enumerate the constitutional failings of the bill.

• Debate in the Senate and House made clear that Kansas is no longer cool in Missouri. A year ago, when Republicans unsuccessfully pushed for tax cuts, it was all about competing with Kansas. Now that it’s painfully obvious that deep tax cuts have left Kansas broke and without the promised influx of jobs, Missouri Republicans are at great pains to note that their bill is much more limited a cautious than the Kansas bill.

Those arguments are accurate. Missouri’s bill allows for a phase-in period and a weak safeguard that prevents the phase in from taking effect if revenues don’t reach a target level. But the bill copies Kansas by giving the biggest break to pass-through businesses at the expense of other companies. And it is Kansas-like in that wealthier individuals stand to gain the most.

As in Kansas, supporters of the tax cuts insist they’ll bring “growth,” meaning jobs. There’s little data to back that up, and the instances that proponents use are questionable. But if they don’t work, most lawmakers won’t be around to blame for that, either.

• Having secured its long-awaited tax cut, the General Assembly now appears prepared to...raise taxes! Or at least ask voters to do so. Lawmakers are close to placing on the ballot a proposal to increase the state sales tax by three-fourths of one percent to pay for road repairs and transit projects. So they’ll be giving away $600 million in tax cuts with a bill that favors certain businesses and rich people, while seeking to bring in $500 million a year through a sales tax felt most keenly by low-income Missourians and senior citizens. Go figure.

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