Even though Gov. Jay Nixon vetoed a bill that would cut taxes but reduce state revenues, school districts are not confident his veto will hold.
“Supporters of HB 253 believe education funding will not be adversely affected,” said Fort Osage Superintendent Mark Enderle. “In fact, they counter that the potential for economic growth is such that more revenue will be generated. Our board does not share this position. One of the major concerns is what would take place if the legislators’ optimistic projections are incorrect.”
The tax cut legislation was introduced by the Republican-led Legislature this session, arguing that is is needed to keep pace with Kansas and Oklahoma, which have cut taxes. The legislation passed in the General Assembly, but Nixon vetoed it in June, calling it a “fiscally irresponsible experiment.” Legislators will try to overturn the veto in September.
The bill would, among other things, phase in a 50 percent deduction over 10 years for business income reported on individual income tax returns.
Proponents say the bill would provide tax-relief not only for businesses, but for Missouri residents as well.
Opponents, including a number of school districts and education associations, say the bill would jeopardize education funding and the ability to provide essential programs.
“With a price tag of $800 million, this legislation is an ill-conceived, fiscally irresponsible experiment that would hurt our economy and jeopardize funding for vital public services,” Nixon said in a press release. “Writing a bad check and saying you’ll figure out a way to pay for it later might make sense in Washington, D.C., and some other states, but it’s not how we do things in Missouri.”
Senator Will Kraus, R-Lee’s Summit, said he was disdappointed in Nixon’s veto. Kraus is the legislation’s main architect and sponsored the Senate version of the bill.
“I am disappointed that the governor, who campaigned on fiscal responsibility, would veto the first broad-based tax rate cuts in nearly 100 years,” he said. “Putting money back in the hands of taxpayers and job creators is the best way to stimulate our economy and put Missourians back to work.”
Independence Superintendent Dale Herl said the Independence Board of Education felt it was important to support the governor’s veto because of the potential impact on education funding.
“We are extremely concerned,” he said. “Yes, there are triggers in place, but these give people a false sense of security. We would still see substantial budget cuts and a negative economic impact if the governor’s veto is overturned.”
Republicans will try to override Nixon’s veto during the Legislature’s veto session in September. They need two-thirds majorities to do so – 109 votes in the House and 23 in the Senate.
In response, Nixon announced $400 million in budget restrictions in late June, a “down payment” he said on the lost revenue from the tax cuts. Most of the budget restrictions will affect newly created programs, however a $66 million scheduled increase to the state’s formula for funding public schools and transportation was among the casualties.
Page 2 of 2 - “Using the withholdings to prevent a possible veto override of House Bill 253, which would lower our tax burden, is overstepping and holds the people hostage with their own money,” Senate President Pro Tem Tom Dempsey, R-St. Charles said in a prepared statement.
And a new coalition of business groups, heavily financed by conservative activist Rex Sinquefield, is planning a media campaign to convince legislators to override the veto.
The Missouri Association of School Administrators has suggested every school district in the state prepare contingency plans if the tax bill is enacted over Nixon’s veto. While it is not the time to panic, MASA said, districts need to be “prepared for all possibilities.”
“Missouri has the Hancock Law, which would require a vote of the entire state for increasing taxes should the experiment with tax reductions that the legislature is attempting fail. Furthermore, tax amnesty, if the legislators are accurate with their projections, will only generate a one-time $50 million revenue increase. This is not a continuous revenue stream,” Enderle said. “Lastly, if Congress passes the Streamlined Sales Tax which essentially authorizes states to collect sales taxes on Internet sales, HB 253 states that it will trigger an automatic 0.5 percent reduction on the state income tax for individuals. HB 253 also makes this half of 1 percent income tax cut retroactive for the past three years. Thus, the projected $200 million in increased sales tax collections from Internet sales would be offset by a $300 million decrease in personal income tax receipts resulting in a net $100 million revenue loss. The impact of this bill would – at best – keep current funding levels flat. At worse, we would see continued reductions, as has occurred the past six years.”