Missouri Lawmakers Pass ‘Border War’ Tax Cut Plan May 10, 2013

(AP) — Battling back against tax cuts in neighboring Kansas, Missouri lawmakers gave final approval Thursday to an income tax cut for businesses and individuals that could reduce state revenues by about $700 million annually when fully phased in.
The legislation, which would mark the first decrease in Missouri’s income tax rate since 1921, was touted by majority party Republicans as a means to keep Missouri economically competitive in an interstate battle for businesses. Some Democrats warned it could jeopardize future funding for schools and other government programs.
Democratic Gov. Jay Nixon has not indicated whether will sign or veto the bill but has said he will “assess its impact on vital public services.”
The House passed the legislation 103-51, falling six votes short of the threshold that would be needed to override a potential veto. The Senate passed the bill Wednesday by a 24-9 vote.
INDIVIDUAL TAXES
– Missouri’s current top individual income tax rate of 6 percent, which applies to all income over $9,000, would be reduced by one-twentieth of a percentage point annually for 10 years and then set at 5.5 percent on all income over $8,000.
– Each incremental tax cut would take effect only if annual state revenues rise by at least $100 million over the highest revenue point of the previous three years.
– If Congress passes federal legislation enhancing states’ ability to collect taxes on online sales, Missouri’s top individual income tax rate would be reduced by an additional one-half of a percent.
– Beginning in 2014, the current personal deduction of $2,100 per individual on state income taxes would be increased to $3,100 for those with adjusted gross incomes below $20,000.
BUSINESS TAXES
– Missouri’s current corporate income tax of 6.25 percent would be reduced by three-tenths of a percentage point annually for 10 years until it reaches a rate of 3.25 percent.
– Each incremental corporate income tax cut would take effect only if annual state revenues rise by at least $100 million over the highest revenue point of the previous three years.
– Beginning in 2014, 10 percent of the business income reported on individual tax returns could be deducted. That deduction would increase 10 percentage points annually until it reaches a 50 percent deduction in 2018.
SALES TAXES
– The measure requires Missouri to join a “streamlined sales tax” compact with other states to collect voluntary tax payments from online retailers that sell products to people in Missouri.
– The bill also tightens existing requirements for when out-of-state businesses or online retailers may have to pay taxes on sales to people in Missouri.
TAX AMNESTY
– Taxpayers with overdue bills as of 2012 can receive a waiver on penalties and interest if they pay their full tab between Aug. 1 and Oct. 31. The amnesty would be rescinded of they violate state tax laws at any point during the next eight years.