JEFFERSON CITY, Mo. -- A Republican push to cut Missouri’s income taxes is facing resistance as lawmakers convene Wednesday to decide whether to override a bevy of vetoes by Democratic Gov. Jay Nixon.
The income tax cut was the marquee accomplishment this year of Missouri’s Republican-led Legislature, which touted it as a means of spurring the economy and competing with recent tax cuts in Kansas, Oklahoma and other states.
But Nixon vetoed the bill in June and embarked on an aggressive summer campaign in defense of his decision. The governor said the potential loss of hundreds of millions of tax dollars could jeopardize funding for education, mental health care and other services. He also warned that seniors and the sick could suffer from a drafting error that would impose state sales taxes on prescription drugs.
The tax cut bill was the most high-profile issue among Nixon’s 33 vetoes, which also included legislation attempting to nullify some federal gun control laws.
Republicans appear unlikely to get much, if any, support from Democrats in their quest to override Nixon’s tax-cut veto. And several House Republicans already have said they are likely to vote “no” while echoing Nixon’s concerns.
Without party solidarity, Republican legislative leaders face a challenge getting the two-thirds majority needed for a veto override. That’s because the GOP holds 109 House seats—the exact amount needed for an override—and a one-vote cushion of 24 seats in the Senate.
The Missouri tax-cut battle has been one of the most intense yet in what has become a nationwide effort by conservatives in state capitols to slice income taxes that for decades have formed the financial foundation for many government services. About a dozen states already have cut income taxes this year, including sweeping changes to tax codes in Kansas and North Carolina and a ratcheting down of rates in Arkansas, Indiana, Ohio, Oklahoma and Wisconsin.
“This is a competitiveness issue for us,” said Dan Mehan, president and CEO of the Missouri Chamber of Commerce and Industry.
Retired investment firm executive Rex Sinquefield poured nearly $2.4 million into a marketing campaign promoting Missouri’s income tax cut bill. The Missouri Club for Growth warned it might recruit challengers to GOP lawmakers who oppose the veto override. Texas Gov. Rick Perry even waded into the debate, headlining pro-tax cut events in the St. Louis area and running ads in Missouri denouncing the veto and encouraging businesses to consider relocating.
Education groups were at the forefront of the opposition. A teachers’ union ran ads against the tax cut, and more than one-fifth of Missouri’s local school boards passed resolutions against it. They warned of potential teacher layoffs, overcrowded classrooms, longer bus rides and the elimination of extracurricular activities if the income tax cut led to a reduction in school funding.
“Should it take effect, this bill will devastate state services such as early childhood and K-12 education,” said Doug Whitehead, the president-elect of the Missouri School Boards’ Association.
The legislation would gradually reduce Missouri’s corporate income tax rate from 6.25 percent to 3.25 percent and its top tax rate for individuals from 6 percent to 5.5 percent over the next decade, so long as state revenues continue to rise by at least $100 million annually. It contains a five-year phase-in for a new 50 percent tax deduction for business income reported on individual tax returns. Another part of the bill would trigger additional income tax cuts if the federal government enacts a law making it easier for states to collect taxes on online retail sales.
The bill’s price tag also is in dispute. Legislative researchers put the eventual annual cost at $540 million. Nixon contends Missouri could lose $1.2 billion in tax revenues in a single year.