The political firestorm over the wisdom of massive tax cuts — familiar to Kansans for more than two years — has now fully engulfed Missouri.
On Wednesday, Democratic Gov. Jay Nixon emphatically vetoed a bill that would have phased in $700 million in yearly tax cuts for the state’s businesses and individuals. He called the measure “ill-conceived” and “irresponsible” at a morning news conference in Kansas City.
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Within minutes, Missouri Republicans fired back, denouncing Nixon’s veto and promising an override attempt when lawmakers return to the state Capitol in September.
“Gov. Nixon wants every last taxpayer dollar he can possibly squeeze from the people,” House Speaker Tim Jones said in a statement. “In effect, the governor’s veto is a back-door tax increase.”
That exchange previews an argument sure to dominate Missouri politics this summer and beyond. It also marks the biggest showdown between Nixon and the GOP-led General Assembly since he took office in 2009.
The heart of the Republican plan would have gradually cut taxes on corporations and other businesses in half, while reducing the top individual tax rate to 5.5 percent from 6 percent over the next decade. Legislative researchers estimate the eventual cost, when fully phased in, would be $692 million a year.
Corporate and individual tax cuts would go into effect only if state revenues grow every year by at least $100 million.
Nixon has been signaling a veto for weeks. Wednesday — backed by educators, lawmakers and business officials at a Kansas City news conference — he attacked the bill with unusual ferocity.
The tax bill “would endanger and put at risk necessary services,” he said, “and it’s done so in a sloppy, unfair way that could have negative impacts for generations to come.”
Sen. Will Kraus, a Lee’s Summit Republican, sharply criticized Nixon’s veto. The tax cuts, he said, were designed to help Missouri compete with Kansas, which has broadly reduced taxes for small businesses and individuals.
“When you cut taxes, revenue grows,” he said. “You put money back in the hand of taxpayers, who spend it in the economy. Gov. Nixon is for big government and wants to keep as many taxpayer dollars as he can.”
Business reaction was mixed.
“With one stroke of the pen,” Associated Industries of Missouri said in a news release, “Nixon has wiped away the first tax rate decrease for Missouri businesses and individuals since the 1920s.”
But the Civic Council of Greater Kansas City, which represents some of the area’s biggest and most important employers, supported Nixon’s choice. Betsey Solberg, a member of the group, introduced Nixon at the Kansas City announcement, and the governor’s office released a Civic Council letter urging the veto.
“Missouri has already drastically cut state services, including class sizes, raising college tuition and deferring maintenance of Missouri’s roads and bridges,” wrote Donald Hall, president and chief executive of Hallmark Cards Inc. “Further tax cuts will only make matters worse, and do nothing to create jobs or make businesses more competitive.”
Supporters of the tax-cut measure have argued for weeks that Missouri is losing its competition with Kansas for new businesses and residents. Kansas decided last year to eliminate taxes for some small businesses and reduce individual tax rates across the board.
Those decisions, though, caused major headaches for Kansas legislators this year. Lawmakers went deep into overtime before agreeing to extend part of a state sales tax and eliminate some tax deductions to raise more money for state operations.
Nixon called the Kansas experience a good lesson for Missouri.
“We’re adding resources and strengthening education in Missouri, and they’re unable to do that,” he said. “They’re scrambling around, trying to fill up a hole they made.”
Rep. Randy Dunn, a Kansas City Democrat, echoed that criticism. “I don’t think we need to be following Kansas to the bottom,” he said.
But Kraus and other Republicans said Missouri must compete with Kansas.
“Kansas is saying, ‘Where are the jobs created? What can we do to grow?’ They gave incentives to draw jobs to Kansas,” he said.
Nixon also criticized a drafting error in the bill, which he said would mean a $200 million increase in taxes on prescription drugs and textbooks.
Republicans called the claim a red herring. The error, they said, could easily be fixed before it goes into effect in 2015 — and they blamed the mistake on Nixon.
Although there is plenty of support in the Senate for an override of the governor’s veto, whether Republicans have the votes in the House is far less certain.
Republican state Rep. Jason Smith was elected to Congress on Tuesday night, bringing the number of Republicans in the House to 109 — the exact number needed for an override. He is unlikely to be replaced before the fall veto session, and when the bill passed in early May, three GOP lawmakers voted against it.
Nixon suggested he might campaign against the tax cuts until the September session.
“I’m not going to hide,” he said.