Senate bills could raise tax revenue
Monday, March 18, 2013
Missouri senators have been passing tax cuts, credits, deductions and increases at such a rapid pace that if calculators produced heat, they would be burning the fingers of anyone trying to figure out the bottom line.
Would Missouri’s future budgets be short millions of dollars if all the measures passed by the Senate actually become law? Or would the state come out ahead at the expense of its taxpayers?
Few people at the Missouri Capitol know the answer to those questions right now. But one estimate, compiled for The Associated Press by a former legislative tax analyst, Brian Schmidt, suggests that Missouri may reap a net gain of $355 million in 2016, with that gradually declining to a $118 million revenue increase by 2019.
The driving force for the tax gain is a proposed sales tax that would be dedicated to roads and other modes of transportation. Other government services that rely heavily on general tax revenues — including schools, prisons and mental health centers — could be left competing for a share of a smaller pool of money as a result of numerous income tax reductions.
Although a few of the least costly tax changes already have been sent to Gov. Jay Nixon, most of the Senate’s proposals remain to be vetted by the House after lawmakers return from their spring break on March 25.
What if the Senate’s plans ultimately become law?
It would “fundamentally change the tax code in a way that hasn’t been done in almost 100 years,” Sen. Eric Schmitt, R-Glendale, told colleagues while debating one of the most prominent parts of the tax overhaul.
Since convening in January, the Missouri Senate has passed legislation making at least 25 substantive changes to Missouri’s tax policies.
One of biggest changes would reduce the state’s top tax rates for individuals and corporations by three-quarters of a percentage point. That could be countered by a sales tax hike of 1.5 cents, including a half-cent for general revenues and, if approved by voters, a full penny allotted for transportation.
Other sections of the Senate plan would exempt the first $25,000 of income from corporate taxes, allow people to deduct half their business income on their individual tax returns and double the personal deduction for individuals with less than $20,000 of adjusted gross income.
Additional Senate-passed provisions would exempt recreational fees such as health club memberships from the state sales taxes but impose the levy on textbooks and rewrite state law in an attempt to collect more taxes on Internet sales and from out-of-state companies that have customers in Missouri.
All of the above tax changes would apply to any person or business.
But the Senate has also approved numerous tax changes tailored for particular industries or charitable causes.
Legislation would reduce the tax credits available for the renovation of historic buildings and construction of low-income housing. Bills would eliminate tax credits for foreign adoptions, neighborhood preservation programs and health insurance premiums paid by self-employed people. And they would reinstate or renew expiring tax credits for wood energy products, home renovations for the disabled, surviving spouses of deceased public safety officers and donations to food pantries, pregnancy resource centers and organizations that aid abused and neglected children.
Other Senate-passed bills would create new tax credits for international exports at Missouri airports, computer data centers, investors in high-tech startup businesses and organizations that host big-time amateur sporting events such as NCAA tournaments.
Chuck Pierce, a lobbyist for the Missouri Society of Certified Public Accountants, said the organization is trying to analyze each piece of the Senate tax-change puzzle to make sure it fits properly into state law and is practical to implement.
The task is complex because of the broad scope of the Senate’s proposals.
When tinkering with tax laws, “you can change what you tax, you can change how you tax, and you can change how much you tax,” said Pierce, a CPA in Jefferson City. “And they’re talking about all of that.”
In general, the Senate bills would increase Missouri’s reliance on consumer taxes and decrease its dependence on income taxes. Those with greater incomes could gain the most. Those who spend a larger proportion of their income on consumer items could gain the least, or perhaps pay more in taxes.
Senate President Pro Tem Tom Dempsey, R-St. Charles, said the intended effect is “to spur employment, to increase personal incomes and to grow our economy in a way where we would be a leader in our region and a leader in the nation.”
Democrats say a more likely result is a drain on state resources that will hurt schools, colleges and social services — ultimately harming the economy.
The key changes in the Senate plan are “debilitating and dangerous,” warned Senate Minority Leader Jolie Justus, D-Kansas City.