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.

Missouri Senate Passes Gradual Tax Cuts to Answer Kansas in ‘Border War’ May 8, 2013

Jolie Justus, . (AP) — A new plan to gradually cut Missouri’s income taxes on individuals and businesses is poised to pass the Republican-led Senate as part of an effort to counteract recent income tax cuts in Kansas.
A vote on the tax-cut legislation was expected to occur later Wednesday. Senate Democrats at midnight dropped their opposition in the face of an apparent Republican warning that continued resistance would result in forced votes on additional measures Democrats oppose.
The legislation, which also must go to the House, would mark Missouri’s first reduction in income taxes in more than 90 years, if signed into law by Democratic Gov. Jay Nixon. Senate Democrats said they were hopeful that Nixon would veto the measure.
The legislation would gradually reduce the state’s top individual income tax rate of 6 percent to 5.5 percent over the next 10 years. It also would phase in a 50 percent deduction for business income reported on individual tax returns over the next five years. And it would gradually reduce Missouri’s corporate income tax rate of 6.25 percent to 3.25 percent over the next decade.
Unlike previous tax cut plans endorsed by the Senate and House, the new proposal includes no sales tax increase to help offset the lost income tax revenues. That’s because Nixon has opposed a sales tax hike. The new plan also contains a contingency clause making the main incremental tax cuts effective only if state revenues continue to rise.
“I believe it is going to work. I believe it is going to create more jobs and create more revenue for the state,” said Sen. Will Kraus, R-Lee’s Summit, who proposed the plan.
Missouri lawmakers are looking to keep pace with Kansas- or at least not fall too far behind – in an ongoing battle for businesses in border communities such as Kansas City, St. Joseph and Joplin.
Kansas lawmakers last year passed a measure that reduced individual income taxes, increased standard deductions and exempted the owners of 191,000 partnerships, sole proprietorships and other businesses from income taxes. But that led to projected budget gaps. So Kansas Gov. Sam Brownback now is pushing legislators to cancel a scheduled sales tax cut in order to avoid budget shortfalls over the next five years that he says could necessitate cuts to higher education funding.
Missouri Republicans said their plan isn’t as aggressive as the one in Kansas.
Democrats argued that Missouri should wait to see what happens in Kansas and warned that an income tax reduction could lead to deep budget cuts down the road.
“We aren’t going to be able to fund things like schools, roads and everything else,” said Sen. Paul LeVota, D-Independence.
Democrats spoke against the legislation for six hours Tuesday night. Senate Minority Leader Jolie Justus, D-Kansas City, said they decided to stop after Republican leaders threatened to force a vote on voter photo identification legislation and other measures Democrats oppose.
While the tax-cut bill would forgo some future revenues, an actual decline in state revenues is not likely. That’s because the legislation would make each annual cut in corporate and individual income taxes effective only if revenues grow by at least $100 million over the state’s highest general revenue point in the previous three years.

Kansas ‘Border War’ Casts a Big Shadow in Missouri House Tax Talks April 2, 2013

(AP) – Kansas remains the reference point as Missouri lawmakers consider whether to cut income taxes and raise the state sales tax.

During a House committee hearing Tuesday, business groups argued Missouri must cut income taxes to keep employers from being lured across the western border by recent tax cuts in Kansas.

But education officials pointed to budget gaps in Kansas and expressed fears that schools could lose funding if Missouri cuts its tax revenues.

The hearing came as a St. Louis-based nonprofit group called The Missouri Budget Project began airing ads opposing the legislation while citing the potential loss of $960 million of revenues annually.

Nixon Rips Senate’s Border War Tax Cut Plan March 7, 2013

(AP) — Gov. Jay Nixon denounced a new Senate plan to overhaul Missouri’s tax policies Thursday, asserting that a proposed sales tax increase could be especially harmful for seniors and veterans who might not benefit from a corresponding income tax cut.
The Democratic governor voiced his opposition to the Republican-backed plan just a day after it received preliminary approval in the Senate, where supporters touted it as a necessary step to keep pace with recently enacted income tax cuts in Kansas.
The central part of Senate bill would gradually reduce Missouri’s individual and corporate income taxes by three-quarters of a percentage point over five years while also deducting half of the business income that gets reported on individuals’ tax returns. To offset part of that lost tax revenue, the legislation would gradually raise the state sales tax by one-half cent over the same period.
Asked Thursday about the Senate legislation, Nixon focused on the proposed sales tax increase. He said it could especially affect seniors and veterans who rely on Social Security checks or federal benefits and may not gain much an income tax reduction. He also suggested that the sales tax increase could hurt working-class families purchasing baseball gloves or other items for their children.
“The bottom line is when folks go to the store, they’ll be paying more for everything they buy,” Nixon said. “That is a tax increase, and I am not for it.”
Bill sponsor Sen. Will Kraus, R-Lee’s Summit, says the legislation would equal a $450 million annual reduction in state tax revenues once fully implemented. The nonprofit Missouri Budget Project, which analyzes financial issues with an emphasis on their effect on the poor, estimates a $700 million annual cost.
Nixon did not address a question Thursday about whether the state could afford the lost tax revenues. Some Democratic senators have denounced the plan “irresponsible” while predicting it could jeopardize future funding for schools and other government services.
The legislation needs another Senate vote before it can move to the House.