By Marvin Sands
As most of you know by now, both the Missouri House and Senate overrode Gov. Jay Nixon’s veto of Senate Bill 509. This bill is the tax cut bill promoted by the Republican majority and strongly encouraged by mega-millionaire Rex Sinquefield of St. Louis and many out-of-state lobbyists.
The Missouri Senate had a supermajority of Republican members and enough votes to come up with a two-thirds majority for the override. In the House it was a different story. Republicans held a large majority, but not enough for a two-thirds majority. They needed one critical vote and got that from Rep. Keith English, a Democrat from Florissant.
This tax cut bill was a top priority of Missouri Republican legislators. Last year, Governor Nixon vetoed HB 253, which was a similar bill and the veto was barely upheld.
The crux of the bill is as follows: It will gradually cut Missouri’s top individual income tax rate starting in 2017 from 6 percent to 5.5 percent on all income more than $9,000. When fully implemented in 2022, top earners making more than $100,000 will get a tax break of nearly $1,700, while those just under $100,000 will get around $80 (dinner for two at the Plaza). The middle-income earners, those with incomes around $44,000, will get about $32, enough to maybe purchase an oil change for the family car. Lower income earners, the poor, might be able to buy a hamburger, about $6, and that’s without cheese, of course.
Another part of the bill says that it will phase in a new 2.5 percent deduction for business income reported on personal tax returns. Each incremental cut will only happen, say Republicans, if state revenues grow by at least $150 million over their high mark from the previous three years. They call this a “revenue trigger” or a “safeguard” for Missouri’s budget.
Actually it is a smokescreen, and had this law been applied during the recent Great Recession, Missouri would have lost millions of dollars jeopardizing every segment of the state’s economy including education in every city, community and town. How so? A perfect example: A revenue increase in 2008 fiscal year would have caused a tax cut to occur in 2009 as state revenues went into the cellar as a result of the recession. The “trigger” would have been worthless. Revenues in the state need to grow by $250 million per year just to keep up current services.
Examinations of the bill by the Missouri Budget Project have concluded that revenue will be slashed by as much as $800 million per year when fully implemented. That’s more than the state spent in general revenue on all mental health services in the last year or nearly one-quarter of the K-12 funding formula.
Speaking of the K-12 funding formula, an analysis clearly shows that the state is underfunding its schools by $656 million, nearly 20 percent below the required level. As part of the tax cut bill, Republicans are cheering and hooting that they have looked out for education by including $115 million in the law, about 18 percent. That still leaves more than $500 million short of what is needed, about 82 percent. Not much to hoot and holler about, is it?
Marvin Sands lives in Independence.