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Legislators debate slimmed-down version of tax cut

Missouri House Republicans moved to advance new tax-cut legislation at a public hearing Tuesday, but Democrats continued to argue the cuts will hurt education funding and do little to create jobs.

The witnesses and arguments were much the same as during a similar hearing on the Senate side last week, but the bills under consideration are unique.

Three different tax-cut bills were under discussion at the hearing, but most of the focus was on HB 1253, a close relative of last year’s HB 253, which passed out of the General Assembly with wide margins but was vetoed by Gov. Jay Nixon.

After Nixon barnstormed the state raising the specter of drastic cuts to education and mental health funding, the House came up 15 votes short of overriding his veto in September.

This session, the bill’s sponsor, T.J. Berry, R-Kearney, has introduced a slimmed-down version that doesn’t include language that could have increased taxes on prescription drugs and textbooks or raise the possibility of taxpayers retroactively claiming deductions from past filings.

“In response to the governor’s veto, this bill has taken into consideration some of his objections,” Berry said. “It’s very clear what the intent is… we want to keep high-paying jobs in Missouri.”

Berry’s bill reduces business income tax rates by 50 percent in 10 percent increments every year the state collects more revenue than it did in fiscal year 2012. It also reduces the corporate income tax from its current 6.25 percent to 3.125 percent over five years and allows a business with an average payroll at or above 150 percent of the average county wage to get the 50 percent reduction beginning in 2014.

“Taxes affect every company, and I don’t know that picking winners and losers will work, because I don’t know what startup will be the next Cerner, but giving everyone the same shot — that is the way to go,” Berry said.

The bill would reduce the state’s general revenue by anywhere between $71 million and $347 million for each fiscal year that it was in place, according to the fiscal note.

Democrats continued the same line of argument that effectively sustained Nixon’s veto in the fall: this tax cut will hurt schools. Democrats and education officials argue that a reduction in state revenues will inevitably impact the amount of funding schools get from the state, but Rep. Paul Curtman, R-Pacific, said the Legislature can set education funding at or above current levels despite the tax cuts.

Mike Lodewegen, of the Missouri Association of School Administrators, said property taxes have increased to cover funding needs that were not being covered by the state and that the education foundation formula was still hundreds of millions shy of its goals.

“The state has violated its own laws and borrowed money from its own communities to fund (the schools),” he said.

Lodewegen said additional education funding means investment in technology, early childhood education, higher teacher salaries, the hiring of additional counselors and buying new buses and “whether or not Missouri will invest in its greatest asset: its students.”

Business groups that favor the tax cuts argue they are necessary for Missouri to remain competitive with neighboring states that have recently reduced their tax burdens.

“Generally we are a pretty low tax state, but when you have something that fires a shot over your bow like Kansas’ (recent tax) cuts, it’s difficult to get legislators to understand just how significant of a cut that really was,” said Ray McCarty, president of the Associated Industries of Missouri.

“The fear is as those new businesses form, they will flock to places like Kansas,” McCarty said. “In Kansas City, you can move across the street and save 6 to 7 percent.”

Rep. Jeremy LaFaver, D-Kansas City, raised the concern that the taxes were slanted toward the state’s highest earners and helped business owners but not workers.

“There’s no tax cut for citizens,” he said. “Just citizens that own businesses, but not the person who works there.”

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