Senate Bill 509 offers tax relief to both individuals and businesses by using safeguards to protect the state’s general revenue fund from being negatively impacted. The legislation is a fiscally responsible, pro-growth bill that can offer some tax relief without hurting vital state programs, like education. This bill will not harm education; rather, its intent is to create more economic growth so that Missouri schools may potentially benefit from the tax-cutting measures, once they are fully implemented. To be fully implemented, the provisions in the bill have to work.
SB 509 was delivered to Governor Nixon on April 16, and he has 15 days to respond with his promised veto. After May 1, the General Assembly may attempt to override his veto, perhaps before Session’s end on May 16th. In the tax cut disagreements between the legislature and the governor, the true facts of the bill’s intent seem to have been left out of the discussion. Again, the governor is trying to drive a political wedge between the K-12 educational community and Missouri’s General Assembly. He has spread misinformation about the amount of money he says schools could lose if this tax cut was implemented. In truth, the bill requires that revenues increase by at least $150 million each year before the next phase of the tax cut would take effect. These triggers, or benchmarks, are in place to ensure that state revenues will not dramatically plummet.
The main points of the bill are as follows:
1) Reduce the top income tax rate from 6% to 5.5% over a period of years, depending on the increases to general revenue. GR is to increase by $150 million each year before a tax cut would take effect.
2) Phase in a 25% tax exemption for Missouri business income, taking place in 5% increments.
3) Increase the personal income tax exemption from $2,100 to $2,600 for low-income Missourians who make $20,000 or less.
4) Require that individual income tax brackets be adjusted annually for increases in inflation.
5) Phase in and fully implement SB 509 over a period of five years. It will not go into effect until 2017.
The Governor is making another argument in regard to the elimination of the top tax bracket. He believes that SB 509 contains a provision that would entirely eliminate the income tax for Missouri taxpayers with incomes over $9,000. Currently, the top individual income tax bracket applies to all Missourians with yearly incomes over this amount. The Governor maintains that a change in the tax bracket would eliminate the tax liability of those making over $9,000. Most analysts disagree with his position. Many feel that the Governor is misinterpreting the statutes.
Former Missouri Supreme Court Judge Ray Price, in a letter written to members of the General Assembly, maintains that the courts would find that the 5.5% tax rate would apply to all income over $8,000 (as adjusted for the Consumer Price Index) after the tax reductions take effect. There is legal precedent that taxation statutes should be read as a whole, and they are to be viewed in a reasonable way and in line with the legislature’s intent. The language in this chapter of the statute clearly states that it imposes a tax on the “taxable income of every resident.” The bill also specifies that the top income tax shall not fall below 5.5%.
Less than six months ago, Governor Nixon was supportive of creating jobs and giving billions of dollars in tax breaks for one company—Boeing. Today, though, he seems to have taken an opposite approach with SB 509, a proposal that would help not just one company, but thousands of Missourians, as small business owners and individual taxpayers. In trying to lure Boeing to Missouri, we stood together with the Governor, and not one word of opposition came from the education community. Why so now? This bill will not hurt school funding. In fact, education will most likely enjoy the future benefits of it.
Missourians deserve to keep more of their hard-earned money. As I listened to the presentations—both pro and con— during committee testimony, one question kept coming up, “Who can better spend your money, government or the individual taxpayer?” Perhaps this is a question we all need to consider as we look at future taxation concerns.