taxes to keep Interstate 70 from crumbling into ruin?
Passing the first decrease in Missouri’s income tax since 1921 while simultaneously signing off on the largest tax increase in state history has some lawmakers — including a few of the Republicans who control the General Assembly — questioning the logic.
On Wednesday, the Missouri General Assembly passed a bill incrementallycutting taxes by $620 million
over at least five years. That sets up a showdown with Gov. Jay Nixon, who signaled he’ll likely veto it.
On Thursday, a Senate committee is expected to back a bill asking voters toraise the state’s sales tax by a penny
for 10 years to fund updates to transportation infrastructure — money likely to rebuild I-70 nearly from Illinois to Kansas.
That increase would create roughly $800 million a year in added revenue for the state.
Sen. John Lamping, a St. Louis County Republican who last year led the charge that killed the sales tax hike, called pushing for tax cuts and a hike at the same time “illogical.”
“We’re willing to redirect $600 million of revenue for a tax cut, but that same group of Republicans won’t allocate revenue for infrastructure, a core function of government,” Lamping said. “Before you send $600 million to taxpayers, take care of what you’re supposed to be doing. That’s roads.”
Sen. Mike Kehoe, a Jefferson City Republican, said the push for tax cuts and the campaign for a transportation sales tax hike don’t have to be mutually exclusive.
“What we want to do is give Missouri families and businesses some of their money back so they can spend it the way they see fit,” Kehoe said. “Separate from that, we want to ask Missourians if they think we should spend a specific amount of money on specific projects by increasing the sales tax.”
Opponents and supporters of the sales tax plan agree on the dire state of Missouri’s transportation infrastructure.
The national economic recession devastated the state’s transportation budget. Construction funding fell from $1.2 billion to less than $700 million in recent years. By 2017, the Missouri Department of Transportation’s budget will be around $350 million.
That funding has been hurt by the fact that the state’s fuel tax of 17 cents per gallon hasn’t been raised in 20 years while the costs of construction have continued to rise, said MoDOT Director David Nichols. More fuel-efficient cars have also hurt transportation funds.
“The problems we face are immediate,” Nichols said. “Things are only going to get worse.”
Other options — toll roads or hiking the fuel tax — would also have to go before voters. But those ideas are far less popular than increasing the sales tax and are unlikely to win approval, said Rep. Dave Hinson, a St. Clair Republican sponsoring the measure.
If approved by voters, the state sales tax rate would climb to 5.225 percent from 4.225 percent for 10 years. The state transportation commission would have to develop and publish a list of specific projects that would be funded by the tax increase before any ballots are cast.
Of the additional revenue, 5 percent would be designated for cities and counties to pay for local transportation needs. That money could be used for any transportation project, including mass transit.
Over the course of the 10 years the tax would be in effect, it is projected to produce roughly $8 billion in additional infrastructure and an estimated 250,000 construction jobs.
That potential infusion of cash has won the support of organizations likely to get some of the road building business. They include the Missouri Chamber of Commerce and Industry, highway contractors, engineering firms, trucking associations, labor unions and asphalt and concrete manufacturers.
“People won’t mind paying a tax if they see that they will be getting a benefit,” said Ron Leone, executive director of the Missouri Petroleum Marketers and Convenience Store Association.
Opposing the measure is an unusual coalition of groups, ranging from the Missouri Association for Social Welfare to the free-market think tank the Show-Me Institute to the Missouri Municipal League.
While the state sales tax is currently only 4.225 percent, in some parts of Jackson County, for example, cumulative sales taxes already top 10 percent.
“This is a tax that disproportionately affects lower-wage people,” said Jeanette Mott Oxford, executive director of Missouri Association for Social Welfare. She said those with low incomes pay a larger percentage of their income for things like clothing that would be affected by an increase in the sales tax.
Meanwhile, the tax-cutting measure would gradually trim the top individual income tax rate to 5.5 percent from the current 6 percent and phase in a 25 percent deduction for business income reported on personal tax returns.
Those tax cuts would occur only if state revenues grow by at least $150 million over the high mark of the previous three years.
Proponents of the bill say putting more money in taxpayers’ pockets would boost the state’s economy and ultimately increase government revenue. If Missouri doesn’t reduce the tax burden on businesses and individuals, they argue, it risks falling behind its neighbors. Most notable is Kansas, which has slashed or eliminated taxes in recent years.
“This is broad-based tax reform that would make our state more competitive,” said Rep. Andrew Koenig, a Manchester Republican. “It cuts taxes for every Missourian that pays a tax.”
Critics of the idea argue that Missouri is already a low-tax state underfunding vital services such as education and public safety. Using Kansas as an example is foolish, they say, because that state has struggled with revenue since its tax cuts went into effect.
Republicans hold 108 seats in the Missouri House — one vote shy of a two-thirds veto-proof majority. The tax cut bill passed Wednesday with the support of one Democrat — Rep. Jeff Roorda of Jefferson County.
While he stopped short of promising a veto Wednesday, Nixon panned the tax cut legislation.
“On its face,” Nixon said, “this year’s reckless fiscal experiment looks an awful lot like last year’s reckless fiscal experiment.”