JEFFERSON CITY, Mo. — It’s time for tax cuts.
Last week, the Missouri Senate approved a corporate tax reform package by a vote of 28 to 4. Senate Bill 674 would drastically reduce the state’s business tax rate, nearly cutting it in half. Additionally, the bill alters language that its supporters say allowed companies headquartered out-of-state to pay fewer taxes than their in-state competitors.
“It’s a massive tax cut for Missouri-based businesses, without blowing a hole in the budget,” said Sen. Andrew Koenig, R-Manchester, addressing the state press corps. “You know, nothing’s more destructive to economic growth than the corporate income tax, and so we need to make our state more competitive.”
Those critical of the measure are worried cutting taxes might imperil revenue at a time when funding is tight.
Although he decided to vote in favor of Senate Bill 674, Sen. Jason Holsman, D-Kansas City, expressed concerns about the legislature’s continued push for lower taxes.
“Do you think that that’s going to help our revenue situation to fund these obligations, or do you think it’s just going to exacerbate the problem that we had this morning, which was not having enough revenue to cover all the bases?” Holsman said during debate on the bill.
The senator was referring to a Senate Appropriations Committee hearing held April 10. The committee is quickly approaching its deadline to approve the state budget for the next fiscal year. It might have to make further cuts to vital public resources, such as higher education and health care. However, the extent to which these programs might be cut — and, indeed, which programs will see reductions at all — is still being debated.
Under the Missouri Constitution, the General Assembly must pass a balanced budget. Thankfully, the “balanced” requirement seems less daunting now than it has in past years. The 2017 process, alone, resulted in a spending cut of $251 million. Don’t expect such drastic reductions for 2018.
Senate Bill 674 is a companion to Senate Bill 617, another tax reform proposal under Senate consideration.
While Senate Bill 674 alters the corporate income tax, Senate Bill 617 focuses on lowering the individual income tax for most Missourians — especially those at the very top and bottom of the income distribution scale. Senate Bill 617 would also gradually increase the motor fuel tax to provide more funding for roads, bridges and other public infrastructure.
Senate Bill 674 cleared the Senate without much fuss, probably due to its relatively minor projected effects on state revenue, or perhaps because it favors Missouri-based corporations over out-of-state interests.
When Senate Bill 617 comes up for a vote, it’s likely to receive much harsher criticism. Left-leaning senators are uneasy about lowering income tax rates for the wealthiest Missourians, even if low-income citizens receive tax cuts, as well. Meanwhile, some conservative lawmakers have voiced concern over raising the motor fuel tax. Currently, it’s one of the lowest in the nation; a fair share of Assembly members would like to keep it that way.
Senate Bill 674 now heads to the House of Representatives for further discussion. Both chambers of the General Assembly have until May 18, the end of the 2018 legislative session, to approve the bill.
After that? The bill must be re-filed for the next legislative session, which begins in January. Before then, Missouri will hold another round of statewide elections. For supporters of the bill, it’s a risk to wait; the next General Assembly might be less amenable to cutting taxes.