Barbara Shelly

For Missouri Republicans, defending controversial tax-cut bill is a struggle

The definition of what passes for a tax increase these days keeps stretching.

Consider Missouri Republican House Speaker Tim Jones’ response to Democratic Gov. Jay Nixon’s resounding veto of the ill-conceived and damaging income tax cut bill that the General Assembly passed this session.

“In effect, the governor’s veto is a back door tax increase,” Jones said.

Please. Refusing to relinquish more funding for a cash-starved state in order to please certain wealthy business interests is not in any way a tax increase. It is, rather, a show of support for Missourians who wish a better future for themselves and their children.

The income-boosting prospects that come with a quality K-12 and university education vastly exceed the small amount of savings most Missourians would ever achieve from the poorly written bill that Nixon vetoed. But good schools and affordable college educations are placed at risk if the legislature overrides Nixon’s veto.

For Jones to come up with such a weak rationale to defend the tax cut bill shows what a poor case Republicans really have.

Indeed, the governor’s extensive veto message makes clear what a mess this bill is. It is disturbing that lawmakers passed such a deeply flawed piece of legislation.

For example:

• The bill would raise the cost of prescription medicine and textbooks by eliminating sales tax exemptions. To be sure, Missouri’s sprawling sales tax extensions could use a look, but docking sick people and college students is not the place to start.

• So-called safeguards in the bill that delay tax cuts during economic downturns won’t work. As Nixon points out, a similar bill would have required Missouri to cut taxes in fiscal year 2009 based on tax collections the previous year, even though the state was in serious trouble by then because of the global economic downturn.

• The loosely written bill will encourage people to game the system in order to classify as much income as possible as exempt. As Nixon put it: “This rewards tax avoidance activity without concomitant economic activity and thereby makes our tax code less efficient.”

Projections for how much revenue Missouri would forfeit as a result of the tax-cut bill have been all over the place since the legislature began its discussion. Optimists who like the idea cite an estimate between $492 and $692 million. Nixon’s detailed analysis places the cost at more than $800 million annually when the bill is fully phased in.

I’d go with the governor’s estimate. For one thing, the lower estimate assumes the state will obtain a lot more revenue from collecting sales taxes on on-line purchases than any objective analysis has come up with.

Some Republicans in the legislature want income tax cuts because of an irrational fear of what Kansas is doing. The GOP leadership wants income tax cuts because some of its members, like Jones, take their direction from the American Legislative Exchange Council. Known as ALEC, the council is a corporate-funded free-market group beholden to economist Arthur Laffer and others who promote the unproven theory that income tax cuts are the key to economic growth. Jones and other influential Missouri Republicans are eager to burnish their credentials within ALEC.

Whatever their motives, Republicans have produced a terrible bill, but they will fight like pit bulls to override the governor’s veto. By the time they get their chance in September, though, it should be clear to Missourians that Nixon is the one sticking up for their interests.

As he said in his veto message: “No legislation that would gut K-12 education in exchange for letting LLC shareholders call half of their income exempt can be called fair. No legislation that would give the lobbyists who helped write the bill a 50 percent tax cut,while shaving just .5 percent off his mechanic’s tax rate over the next decade can be called fair.”