Government & Politics

Missouri Senate advances income tax cut that critics compare to one in Kansas

A push to slash Missouri’s income tax is picking up steam.
A push to slash Missouri’s income tax is picking up steam. KRT

Missouri Senators voted nearly unanimously Wednesday to give first-round approval to a sweeping tax package that critics compare to cuts championed by former Kansas Gov. Sam Brownback and later abandoned by the Kansas Legislature.

With several senators missing from the chamber and little debate, the Missouri Senate took the unexpected move of advancing a tax package expected to cut individual and corporate tax rates while increasing gas taxes for use on roads and infrastructure projects. Senators unceremoniously "perfected" the bill late Wednesday afternoon, giving it first-round approval, but it still faces a long road to becoming law.

"It's the largest tax cut that we've ever seen in the state of Missouri," said Sen. Bill Eigel, a Weldon Spring Republican and sponsor of the bill.

Eigel said the bill's approval was the culmination of months of work and behind-the-scenes discussions to come up with a plan that could win wide approval and would provide tax relief while also allowing lawmakers to boost spending on roads and infrastructure projects. The bill's critics point to Kansas and say the cuts would devastate the state's budget and ability to provide critical services.

The current version of the bill doesn't yet have a fiscal analysis attached, but the Missouri Budget Project, a left-leaning organization that does not support the proposal, estimated it would cost the state between $500 million and $800 million.

“This is like Kansas on steroids," said Amy Blouin, executive director of the Missouri Budget Project.

Eigel estimated the bill would be nearly revenue-neutral in the first round of cuts. It also would reduce some deductions and have Missouri join the Streamlined Sales Tax Governing Board to capture sales tax on online purchases.

After the first year, further income tax cuts can be triggered only if state revenue is high enough. Eigel said that would prevent the plan from devastating the state budget.

"What we learned from Kansas — Kansas didn't have any of those triggers involved in the cuts that they were making," Eigel said. "They just saw cuts off the top and then failed to match them with their spending cuts. What we're doing is ensuring that the cuts only go into effect if revenues have grown by a certain amount."

Eigel was optimistic the bill would get final approval from the Senate in the coming weeks and lawmakers in the House and Senate would be able to come together on a bill. He said his version and the House bill do not have insurmountable differences.

"The larger question of whether we want to reduce the amount of revenue in the state having watched Kansas go through the heartache that they've gone through with trying to meet their obligations — at this point I'm not supportive of the tax cut bill," said Sen. Jason Holsman, a Kansas City Democrat.

Holsman noted the bill provides funds through the gas tax for the Missouri Department of Transportation, but removes them from the budget controlled by legislators who appropriate money for schools, Medicaid and other services.

Blouin said her organization is more comfortable with the House bill because it has a smaller tax cut and halts an existing policy that would allow pass-through entities, such as LLCs, to deduct as much as 25 percent of their income taxes in the coming years.

Missouri already invests less in services than Kansas did even while it struggled with its budget, Blouin said. Kansas is tied up in a lawsuit over funding of its K-12 schools and struggles with instability in its state prisons and child welfare system. Still, Blouin said, Kansas was investing more than Missouri.

“And that was after Kansas made cuts, so Missouri’s cuts would be different in that we’re already lower than most other states.”

Missouri lawmakers would also face an uphill battle to raise income taxes if they found themselves in a persistent budget crisis like that in Kansas. State law requires voter approval if lawmakers want to raise taxes, but the Kansas Legislature didn't face that hurdle when lawmakers overrode Brownback's veto to pass a tax increase expected to generate $600 million each year.

"Kansas dug themselves into a hole, and they had the shovels to dig themselves out," Holsman said. "Missouri — if it digs a hole, we don't have any shovels. We just have a hole."