Missouri Tax Reform, ‘The Sequel’ Starts Again January 17, 2014

(AP) – Kansas is again being held forth as the prime example in Missouri’s renewed debate over whether to cut income taxes.
But rather than being touted primarily by tax-cut proponents, Kansas also was cited Thursday by tax-cut opponents concerned about the potential for falling state revenues and inadequate school funding.
A Republican-led Senate committee heard testimony on a trio of proposals – one cutting taxes only on business income, another reducing the individual income tax rate and a third phasing in tax cuts for both businesses and individuals.
The panel is expected to advance some combination of those proposals in coming weeks as majority-party Republicans try again to enact an income tax cut after Democratic Gov. Jay Nixon vetoed last year’s legislation.
“We are here for the sequel. Hopefully, it’s better than the original in the outcome,” Sen. Eric Schmitt, a Republican from suburban St. Louis who is sponsoring two of the bills, said as the Senate Ways and Means Committee began its deliberations.
As they did last year, lobbyists for business groups again pointed to tax cuts in Kansas and other neighboring states.
Over the past two years, Kansas has exempted the owners of 191,000 businesses from income taxes and sliced tax rates for individuals. Six of Missouri’s eight neighboring states enacted some sort of tax cut last year.
“We are surrounded by states that are beckoning our businesses and citizens to come to them,” said Woody Cozad, a lobbyist for the Gate Way Group, which represents various business interests and mega-political-donor Rex Sinquefield.
Missouri lawmakers are particularly concerned that businesses in the Kansas City area will relocate across the state line to take advantage of the new tax savings.
But opponents of an income tax cut said Missouri already is ahead of Kansas in economic indicators and could jeopardize funding for state services if it followed Kansas’ example.
Kansas revised its financial outlook downward in November. It forecasts that its 2014 general revenues will fall 7.6 percent short of the previous year and 8.7 percent shy of what the state collected in 2012.
The falling revenues have made it more difficult for Kansas to recover from previous education funding cuts that have left basic per pupil aid 13 percent lower than its peak in 2008.
Although Missouri hasn’t cut public school funding, its basic school aid is about $600 million short of what’s called for under state law. If Missouri income taxes are cut, it “may be utterly impossible” to catch up on school funding, said Otto Fajen, a lobbyist for the Missouri chapter of the National Education Association.
Legislative researchers project that a gradual 50 percent tax deduction for business income, which one of the bills proposes, could eventually cost the state $148 million annually.
But the Missouri Budget Project, a St. Louis-based nonprofit that analyzes fiscal issues with an eye on the poor, puts the potential cost at more than $500 million. The costs could be higher for other
A bill by Sen. Will Kraus, R-Lee’s Summit, would reduce the individual income tax rate to 5 percent, create a 50 percent deduction for business income, expand deductions for low-income individuals and exempt corporations’ first $25,000 of income from taxes.
It’s projected by legislative researchers to cost $945 million annually when fully implemented; the Missouri Budget Project puts its eventual cost at $1.8 billion. Tax-cut supporters contend the revenue loss could be made up at least partly by expanded payroll and sales taxes generated by businesses that use their tax savings to hire additional employees and expand operations. But Amy Blouin, executive director of the Missouri Budget Project, cast doubt on such assertions. She estimated Missouri businesses would have to create about 250,000 jobs to offset a $500 million tax cut. “We would have to practically import people from other states to create that level of growth,” Blouin said.

Missouri Lawmakers Lobby for ‘Border War’ Tax Cut On The Border May 21, 2013

A trio of Republican lawmakers, including St.Sen. Eric Schmitt from St. Louis County, campaigned in Kansas City Tuesday for the 2013 Missouri tax cut bill.
Schmitt met with members of the Greater Kansas City Chamber of Commerce at midday.
One of the Kansas City Chamber’s legislative priorities this year was finding ways to compete with the tax cuts and incentives the state of Kansas has used to attract Missouri companies to cross the state line.
Schmitt repeated his claim that while Kansas was first to cut taxes on corporations, small business and its income tax rates–Kansas wasn’t the first to think of it.
“We’ve been working on this before Kansas did,,” he told KMBC 9 News, “but this year, we actually got it done.”
Missouri lawmakers passed a measure calling for a drop in the corporate income tax to be phased in over several years; a tax cut for smaller companies–also to be phased in.
The measure also includes a cut in the Missouri income tax rate from 6% to 5.3%. It is the first such income tax cut in Missouri in 90 years..
Schmitt was hosted by Lee’s Summit Republican Senator Will Kraus. Some of the elements pushed in Schmitt’s bill were combined into Kraus’ version.
Clay County St. Rep. T.J Berry was the bill’s original House sponsor.
Missouri Governor Jay Nixon has not said if he’ll sign the bill or not. Nixon recently said he was worried about an estimated 800 million the bill coust cost the state because of the cuts.
Krause, Schmitt and Berry claim the Nixon number is wrong, that it’s too high. They claim it’s more in the range of $400-$700 million.
Kraus also countered by saying over a decade, the state would get a billion dollars more in money from a strong economy through the tax cuts.
“To bring in an additional one billion dollars over a 10 year period, to cut 700-800 million, i think is a responsible way to do tax policy in Missouri,” said Kraus.
In addtion to cutting taxes, Kansas offers incentives to Missouri companies to move across the state line.
One company, Central States Capital Markets, moved five miles to relocate in Kansas.
The firm, an investment company, had been on the western edge of Kansas City’s County Club plaza.
Dan Stepp, an executive with the firm, said it was the Kansas financial incentives, more than that tax rates, that helped the company to decided to relocate.
He also said the Kansas City suburban location in Prairie Village, Kansas, was easier to get to for many of the firm’s customers.

Missouri Tax Reform Plan to Counter Kansas Emerges November 29, 2012

(AP) — A Republican state senator from St. Louis County plans to sponsor legislation trimming taxes for Missouri businesses.
The bill eventually would cut the corporate income tax rate in half and create a 50 percent tax deduction for business income. The tax cuts would be phased in over five years.
Sen. Eric Schmitt, who leads the Senate’s economic development committee, will sponsor the bill. Schmitt says the tax cuts would signal Missouri’s willingness to help large and small businesses.
Missouri legislative leaders have said they would seek changes to the tax code to spur economic development during the 2013 session. Those efforts come after Kansas passed significant tax cuts earlier this year.