MACON, Mo. – Missouri Gov. Eric Greitens called Monday for 10 percent cuts in personal income tax and reductions in corporate taxes as part of what he has described as the "boldest state tax reform in America," promising that the roughly $800 million cost will be offset by eliminating deductions and incentives elsewhere.
During a visit to a metal parts factory in rural Macon, Missouri, the Republican governor said he wants to cut personal income taxes from 5.9 percent to 5.3 percent. His plan would also cut the state's corporate taxes from 6.25 percent to 4.25 percent for those who make more than about $9,000 a year, which covers most Missourians.
Department of Revenue Director Joel Walters said those cuts, along with a tax credit for low-income workers, would cost about $800 million. But both he and the governor said tax hikes in other areas would make the plan revenue neutral.
"This tax plan puts working families first," Greitens told a crowd of dozens of people in Macon. He added that it will "reward businesses that build and hire people here in the state of Missouri."
Democrats quickly expressed skepticism with the plan.
"Despite a strong economy and low unemployment, Missouri is enduring a second straight year of deep state budget cuts because Republicans put granting large tax cuts to their wealthy donors ahead of the financial stability of the state," House Minority Leader Gail McCann Beatty said in a statement. "The governor's proposal would only serve to make the state's financial crisis far worse than it already is."
There is currently a federal earned income tax credit worth up to $25,000 for single filers and $30,000 for joint filers, depending on income and the number of children in a family. Greitens wants to expand that credit for low-income workers by offering a nonrefundable state tax credit worth 20 percent of what people already are getting under the federal program. He has said that would essentially eliminate income taxes for 380,000 people.
Greitens said the tax cuts would be offset in part by ending a 2 percent discount for businesses if they file withholding taxes on time and by eliminating a program that allows multistate corporations to choose how their taxable income is calculated. The governor instead wants to tax corporations based on their ratio of in-state sales compared to total sales.
Greitens' spokesman Parker Briden said that would mean multistate companies that sell a lot of products in Missouri but don't have many employees in the state will pay more.
The governor's plan also would mean businesses no longer could deduct half of their federal corporate income taxes from state taxes, and it would phase out a similar deduction for individuals making more than $25,000 a year. Greitens is calling to completely eliminate the tax break for those making more than $150,000 a year.
The plan has gotten a mixed reaction from business organizations.
Individual income tax cuts would help small businesses, said Brad Jones, the state director of the small-business group National Federation of Independent Business. And Associated Industries of Missouri President and CEO Ray McCarty praised the plan to cut corporate taxes.
"By lowering our corporate rate, we're going to have one of the lowest in the nation and that would be a real good policy," McCarty said. "Businesses believe that will lead to job creation and investment here in the state of Missouri."
But both criticized the proposal to end the discount for filing withholding taxes on time, which they argued compensates businesses for acting as tax collectors for the state.
Jones and McCarty said it's still too early to tell what the net impact would be on business taxes if the policy is adopted.
A Senate hearing on the proposal is scheduled for Tuesday.