Tax forum participants agree outdated Mo. tax code needs to change

At a forum designed to encourage discussion about Missouri’s tax code, lawmakers and lobbyists showed change isn’t easy.

One of the few things the four speakers at Wednesday’s meeting, dubbed “A Tale of Two Tax Plans,” agreed on was the state’s outdated income tax rate. The highest tax bracket starts at $9,000. All earnings above that amount are taxed at 6 percent. The formula hasn’t changed since it was enacted in 1931.

Jeanette Mott Oxford stressed the need for a more progressive income tax rate. Since the majority of Missouri residents earn at least $9,000, Missouri’s income tax is not as progressive as it should be, said Mott Oxford, a former Democratic representative from St. Louis and the current director of Missouri Association for Social Welfare, a group working to reduce poverty.

Part of the difficulty in changing the tax code, the panelists agreed, is how it works. The legislature may pass tax cuts, but tax increases must go to a vote of the people.

“Every time we decrease those taxes, it’s gone,” said Rep. Judy Morgan, D-Kansas City. “We’re not getting it back.”

The meeting, at Lincoln University’s Inman E. Page Library, also included Rep. T.J. Berry, R-Kearney, and Ray McCarty, president and CEO of Associated Industries of Missouri, a pro-business group.

Panelists thought that some problems could be traced back to the Hancock Amendment. Passed in 1980, the amendment stipulates that the state may take in only a certain amount of revenue.

In the past, money was returned in the form of tax refunds, but the state changed its method to tax cuts. The amount of tax refunds changed on a yearly basis, but because tax increases are difficult to pass, the tax cuts are essentially permanent.

“There will always be lobbyists to kill every tax reform proposal,” McCarty said.

McCarty said Missouri needed to be friendlier to businesses. Employers drive the economy, he said, and low taxes would spur growth. In return, the state would have more revenue.

Companies will look to where it is least costly to do business, he said.

Mott Oxford said Missouri was already not taking in enough revenue, noting cuts in mental health and a lack of education funding. She said tax cuts should be offset by other tax increases.

Mott Oxford and Morgan were intrigued by a bill submitted by Rep. Eric Burlison, R-Springfield, that would have exempted taxes for those making below $11,000, which would benefit low-income earners. But they thought more reform was needed.

In an interview after the discussion, Berry talked about a tax bill he sponsored this legislative session. That bill, House Bill 1253, would cut taxes by $371 million.

Last year, Berry sponsored the controversial House Bill 253, which would have cut taxes by $1 billion. That bill was smaller until the Senate added a lot to it, he said. Berry worried the Senate would increase the size of his current bill, but he wanted assurances on how much it would cost and what it would cut.

He said he hoped to have a vote on HB 1253 early enough so that if it is vetoed, legislators can change it and send it back to the governor.

After HB 253 was vetoed in 2013, Gov. Jay Nixon withheld $400 million from education and other government projects, citing a potential drain on state revenues if his veto were to be overridden by legislators, according to The Associated Press. In September, the House failed to override the veto during a veto session.

The governor has returned $215 million but still holds onto $134 for capital improvements. On Feb. 20, lawmakers endorsed a constitutional amendment that would block some of his budgetary powers.

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