Gov. Eric Greitens laid out an $800 million tax cut proposal on Monday, vowing to reduce Missouri’s top income tax rate and taxes on corporations.
Under the plan, which Greitens is pitching in a series of campaign-style events around the state — including one Tuesday afternoon in Riverside — the top individual income tax rate would drop to 5.3 percent from 5.9 percent.
Any Missourian who earns more than $9,072 annually is in the top income tax bracket.
Greitens’ proposal would slash the state’s corporate tax rate by nearly a third, to 4.25 percent from 6.25 percent. It also creates a non-refundable state tax credit for low-income workers.
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A tax cut bill passed in 2014 and set to slowly phase in over the next decade is projected to reduce Missouri’s revenues by nearly $250 million. That fact has some Republicans legislators concerned that further cutting taxes could leave Missouri with the same budget shortfalls that plagued Kansas lawmakers for years.
The governor’s proposal seeks to soothe some of those concerns and offset the $800 million cost of his tax cuts by eliminating certain incentives for businesses, most notably one that allows retailers to keep a portion of the sales taxes they collect if they pay their taxes on time.
The “timely filing discount” cost Missouri $114 million in 2016.
Under Greitens’ plan, Missouri would take a step toward collecting sales tax on online transactions by joining the Streamlined Sales and Use Tax Agreement. Previous estimates calculated the state could collect between $108 million and $210 million from taxing online sales.
The plan would also pare back how much of an individual’s federal tax payments can be deducted from their state income taxes, and would eliminate a program that allows multistate corporations to choose how their taxable income is calculated.
Greitens said in a press release that a married couple with two children earning $40,000 would see their taxes cut in half under his plan, from $920 per year to $449.
“This tax plan puts working families first, and it’s a better deal for all Missourians because it rewards businesses for hiring people in Missouri,” Greitens said.
House Minority Leader Gail McCann Beatty, a Kansas City Democrat, said the governor’s promises to cut taxes for working Missourians without blowing a hole in the state budget should be greeted with skepticism.
“As Missourians have come to learn, when Eric Greitens speaks he rarely tells the whole story,” she said. “The governor promises to cut taxes for nearly all Missourians but fails to mention that for most people those modest breaks will be wiped out by tax increases elsewhere in his plan.”
Amy Blouin, executive director of the liberal think tank Missouri Budget Project, said she’s encouraged by many of the provisions in Greitens’ proposal.
“There are a handful of positive steps we can take within this tax proposal,” she said, “but also some provisions we believe are unnecessary and counterproductive.”
Patrick Ishmael, director of government accountability at the conservative think tank the Show-Me Institute, said income taxes hurt economic growth and, ultimately, people. The state should reorient its tax policy away from the income tax, he said.
“That the governor’s proposal also appears to target much of the tax relief toward lower and middle income earners is an added bonus for taxpayers,” Ishmael said. “If policymakers can agree to a plan that includes those principles and can advance them in a substantively revenue neutral manner, it would be a historic policy advancement for Missouri.”
Ray McCarty, president and CEO of Associated Industries of Missouri, said lowering Missouri’s corporate income tax rate would make Missouri a more attractive place for opening businesses and expanding current operations.
“When combined with the lower taxes provided in the federal income tax cut,” McCarty said, “this state-level income tax cut will help boost our Missouri economy and create better and higher paying jobs as job creators use the savings to invest in their capital, including human capital.”