Nixon 'educating' groups, public on tax-cuts veto

Missouri’s legislative veto session is three months away.

But Gov. Jay Nixon is wasting no time visiting with groups and making speeches about his reasons for last week’s veto of the proposed law that would cut state income taxes over the next decade.

“I don’t think it’s campaigning,” Nixon said Tuesday morning after urging higher education officials to “make your voices heard now, and make sure my veto is sustained in the fall.”

Instead, the governor said, “I’m trying to give out information. This is a multi-faceted, complicated bill that affects the bottom-line of the services we provide, as well as attempts to raise taxes on the people who are on cancer drugs and are in deep need in this state.

“I feel very strongly that this is not the right path forward for this state, and I’ll use the energy of my office to continue talking about it.”

The governor emphasized when fully implemented, the tax cuts that lawmakers approved last month could create an annual $800 million hole in state government’s budget.

“That is more money than we spend on our entire higher education system each year,” he said, repeating statistics he’s been using since the last day of the legislative session. “That’s more than we spend on corrections. That’s more than we spend on mental health.

“Cuts of that draconian nature are not the way to build an economy for the future.”

Supporters of the tax cut argued it’s needed to compete with neighboring states, including Kansas, that have cut taxes as a way to attract more businesses.

The bill lawmakers sent to Nixon last month includes a phased in, 50 percent reduction over five years for business income reported on individual income tax returns. The state’s corporate income tax rate also would be trimmed by nearly half.

And the top tax rate for individuals would be reduced from 6 percent to 5.5 percent over the next decade.

Lawmakers added a “trigger” that allows the tax rate reductions for corporate and individual taxes to be effective only if state revenues grow by at least $100 million annually over their high point from the previous three years.

But if that language had been law in 2009, when the recession cut Missouri’s revenues by more than $500 million, Budget Director Linda Luebbering said, a tax cut still would have occurred because the state’s 2008 income was at least $100 million higher than the previous three years.

And some tax cuts would occur without the trigger, Luebbering and Chris Pieper, Nixon’s senior legal and policy adviser, told reporters Tuesday afternoon.

One of those is automatic if Congress passes the “Federal Marketplace Fairness Act,” Pieper said. “Without any additional revenue whatsoever, the state of Missouri’s income tax rate will immediately drop half a point.”

The Federal Marketplace Fairness Act provision is drafted, Pieper said, so that half-point reduction will apply not just to the current tax year, but to all prior tax years.

“That means taxpayers can seek a refund of taxes that they have already paid anytime in the previous three years,” he said.

That single provision, Luebbering said, would cost Missouri government at least $300 million for 2013 alone, and the possible three years worth of refunds could cost general revenue collections a potential $1.2 billion.

“That’s a huge potential implication for our budget year that’s going to start” July 1, Luebbering added.

The federal law would allow states to collect sales taxes on online sales more easily. Eventually, Missouri could gain about $210 million a year, she said.

But the ongoing cost of the federal law would be $300 million a year, leaving an annual loss of $80 million if the state took in the estimated $210 million each year.

Pieper and Luebbering said the governor’s staff continues to study the bill’s language to determine if there are other, still undetermined financial impacts that neither the administration nor lawmakers anticipated as the bill’s final version was written last month.

The Associated Press contributed some information used in this story.


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