Missouri bill would decrease income tax, increase sales tax

Tuesday, March 12, 2013 | 8:53 p.m. CDT; updated 1:00 p.m. CDT, Tuesday, August 27, 2013

JEFFERSON CITY — Disregarding objections from Democratic Gov. Jay Nixon, Missouri's Republican Senate passed a tax overhaul Tuesday that would cut income taxes by hundreds of millions of dollars annually for residents and businesses but would charge them more each time they buy something at a store.

The legislation is touted by supporters as the most dramatic change to Missouri's tax policies in decades. It's prompted by a desire to compete with sweeping income tax cuts that took effect this year in neighboring Kansas.

Senators voted 23-11 Tuesday to send the legislation to the House, where Republican leaders also have proclaimed a desire to pare back the state's income tax in favor of a higher sales tax. Senators passed the bill despite each receiving a letter Monday from Nixon urging them to vote "no" because of the effect of a higher sales tax on seniors, veterans and families.

The core of the bill would reduce Missouri's income tax for individuals and corporations by three-quarters of a percentage point over five years while raising the state sales tax by one-half cent over the same time. A provision especially targeted at small businesses would allow people to deduct half the business income that gets reported on their personal tax returns. The bill also includes a section intended to benefit the poor by nearly doubling the personal tax deduction for people with adjusted gross incomes below $20,000.

"This is a policy shift that, in my opinion, is going to drive the economy up, and it's going to put money back in the hands of taxpayers and small businesses in this state," said the bill's sponsor, Sen. Will Kraus, R-Lee's Summit.

Opponents said they feared that tax cut would jeopardize funding for public schools and state services.

"This is the Show-Me State becoming the Me-Too State to be like Kansas," said Sen. Paul LeVota, D-Independence. "There's a race to the bottom that we're going to win against Kansas."

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