This article first appeared in the St. Louis Beacon, Nov. 28, 2012 - When it comes to tax cuts, what’s happening in Kansas may not stay in Kansas.
Missouri state Sen. Eric Schmitt, R-Glendale, says various business tax cuts are being proposed by state Republican legislators as part of a broader effort for “broad-based tax relief” – and to counter Kansas’ action to eliminate all business taxes.
Schmitt, chairman of the Senate’s committee on jobs and economic development, plans to press next session for his proposal to cut state taxes for all businesses by 50 percent over the next five years.
Other tax-cut proposals also are in the works, including some that would trim Missouri’s current individual income rate of 6 percent, the senator said.
New Senate President Pro Tem Tom Dempsey, R-St. Charles, confirmed that was the case. “We’re looking at broad-based tax relief,’’ Dempsey said, calling it “one of the items that we want to move very early on’’ when the General Assembly convenes in January.
During fiscal year 2012, Missouri’s corporate income tax collections totaled $341 million after refunds. That includes income from the state business franchise tax, which is being phased out. At its peak, the franchise tax brought in $90 million a year.
Missouri’s individual income tax is the state’s biggest source of income, by far, accounting for about two-thirds of the state's general-revenue total. In fiscal year 2012, the state collected $4.9 billion in income taxes. About 20 percent of that total may have been from small businesses, said state Budget Director Linda Luebbering.
To help pay for income tax cuts, Dempsey said the Senate will considering trimming the state’s tax credit programs as well as other tax incentives now on the books.
He also expects legislators to resurrect proposals to impose sales taxes on internet sales, which are now exempt in Missouri. Dempsey said the exemption hurts Missouri businesses by offering consumers an incentive to buy online instead.
Although Schmitt and others have proposed for years cutting income taxes for Missouri businesses, Schmitt acknowledged that Kansas’ tax cuts are fueling some of the new fervor.
Kansas' tax cuts contribute to urgency in Missouri
Schmitt was among several St. Louis area legislators, including Dempsey and state House Speaker Tim Jones, who have traveled to western Missouri recently to meet with business leaders, including some in Kansas City.
Concern is heightened, Schmitt said, that Kansas’ tax cuts could lead to more businesses in western Missouri moving across the border. Kansas already has lured some Kansas City area businesses from Missouri by offering tax incentives.
Kansas’ latest cuts, signed into law in May, eliminate business income taxes as of 2013. The top individual income-tax rate also will be reduced to 4.9 percent from the current 6.45 percent.
As a result, Kansas’ personal income tax rate – which had been slightly above Missouri’s – will soon be lower. Still, the tax breaks for business are seen as more significant.
“They definitely have put a marker on the table now, and we’re going to have to figure out how to deal with that,’’ Schmitt said.
Kansas’ action already has had a financial impact – on its own state government. News reports already predict that the state will be forced to make dramatic budget cuts in the hundreds of millions of dollars by 2014, affecting public education and social services.
As far as Missouri’s planned tax cuts are concerned, Schmitt said, “I have a fundamental belief that it grows the economy.”
He and Dempsey say that if Missouri is seen more attractive to business, more jobs will come into the state, thus bringing in more revenue to the state.
Gov. Jay Nixon, a Democrat, has yet to comment on the GOP's efforts, although he has said that he plans to make economic development a hallmark of his second term.
But a fiscally conservative group, United 4 Missouri, has been calling for some time for Missouri to cut its income taxes, in the wake of Kansas' action. There's also a web site, SaveMissouriJobs.com, that features a little girl in a video making similar points.
The Show-Me Institute, co-founded by wealthy financier Rex Sinquefield, also has been calling for Missouri to cut income taxes to compete with Kansas. Sinquefield has sought to eliminate Missouri's income tax, and replace it with a higher sales tax.
Sinquefield said in a recent interview on KTRS (550 AM) (link via the Turner Report) that he has donated money to the efforts in Kansas and Oklahoma to eliminate business income taxes.
Jones meets with local business leaders
Missouri House Speaker Tim Jones, R-Eureka, issued a statement highlighting his private meetings Tuesday with “business leaders from around the state.” Many are members of the Missouri Major Metro Partnership, which represents the three biggest metro areas in the state: Kansas City, St. Louis and Springfield.
Jones didn’t mention tax cuts but did report that he will focus on proposals to revamp the state’s laws regarding lawsuits, and discrimination in the workplace, to be more business friendly.
“We are heading into a session where members from both sides of the aisle know we have to work together to improve our business climate so that our state is an ideal home for existing employers and potential new businesses. That is the No. 1 issue and concern for all Missourians,” said Jones.
“I have had the opportunity to meet with business leaders and chamber members from all over the state and I feel like we are on the same page when it comes to some of the major issues we would like to address in 2013. You will certainly see employment law reform and health-care litigation reform at the top of our list of priorities in the coming year.”
