National tax cut battle turns intense in Missouri

Tuesday, August 27, 2013 | 11:22 a.m. CDT; updated 2:53 p.m. CDT, Tuesday, August 27, 2013

JEFFERSON CITY — Millions of dollars spent broadcasting ads. Alarming fliers and phone calls targeting homes. Politicians barnstorming from one news conference to the next.

By most measures, Missouri appears in the midst of another high-stakes election — except there is nothing on the ballot this year.

The massive campaign is meant to persuade — or dissuade — a few wavering Missouri lawmakers who will decide in September whether to override the governor's veto of the state's first income tax rate cut in nearly a century.

The Missouri battle is one of the most the intense yet in what has become a nationwide offensive by conservatives in state capitols to slice the income taxes that for decades have formed the financial foundation for government services ranging from public schools to prisons. They contend the tax cuts are the path to economic prosperity. Others forecast financial ruin.

About a dozen states already have cut income taxes this year, including sweeping changes to tax codes in Kansas and North Carolina and a ratcheting down of rates in Arkansas, Indiana, Ohio and Wisconsin. Conservative lawmakers who gathered at a conference this month in Chicago received a how-to pep talk meant to spread the tax-cutting movement even further in 2014.

"This is a national agenda — there's a lot of other people that have interest in trying to create jobs in America," said Travis Brown, a St. Louis-based lobbyist and convention speaker who has traveled to 29 states this year promoting lower income taxes.

One of Brown's biggest benefactors, retired investment firm executive Rex Sinquefield, has poured about $2.4 million into an advertising campaign meant to encourage Missouri's Republican-led legislature to override Democratic Gov. Jay Nixon' veto of the tax cut. The campaign includes the state's biggest businesses associations and conservative activist groups such as the Missouri Club for Growth, which has threatened to drop support of any lawmaker who opposes the tax cut.

The tax-cut plan even has gotten the attention of Republican Texas Gov. Rick Perry, a potential 2016 presidential candidate who seized upon Nixon's veto to target Missouri with TV and radio ads recruiting businesses to Texas. Perry is to headline an event Thursday in suburban St. Louis sponsored by a coalition pushing for a veto override.

Opponents of the tax cut have responded with mass mailings and phone calls targeting residents in 15 House districts whose Republican legislators seemed susceptible to being swayed. They have been aided by public school boards warning the tax-cut would jeopardize education funding and undermine the economy.

Nixon added leverage to his veto by withholding $400 million from education, building projects and other services because of concerns that the tax cut would bust a hole in the budget. The governor said he would release the money only if lawmakers sustain his veto. During the past six weeks, Nixon has held roughly 30 public events to rally support for his veto.

"We've worked very hard over the last four years to hold the line on taxes; we're one of the lowest taxation states in the country," Nixon said recently. But "this bill is not the right way to go about it."

The state school boards' association has warned of consequences such as crowded classrooms and lower graduation rates.

The Missouri measure would gradually cut the corporate income tax rate nearly in half and lower the top individual tax rate from 6 percent to 5.5 percent over the next decade, but only if state revenues rise by at least $100 million annually. It also would phase in a 50 percent tax deduction for business income reported on individual tax returns and increase deductions for low-income individuals. It would trigger even more income tax cuts if Congress passes a measure making it easier for states to tax online sales.

Missouri's tax plan was prompted largely by a desire to keep pace with neighboring Kansas, where Republican Gov. Sam Brownback signed tax cut measures each of the past two years.

There's no definitive evidence yet whether the Kansas tax cut will boost or deplete state finances. Kansas tax revenues rose 2.7 percent during the fiscal year that ended in June, which included six months under the new tax cuts. Missouri revenues grew 10 percent during the same period.

Yet Kansas was presented as a shining example during a recent conference of the American Legislative Exchange Council, an association of conservative lawmakers and businesses that crafts model legislation for states.

"The opposition was looking at (the tax cut) and saying these are draconian cuts — you'll not be able to support your school system, the education system, the core services of government," said Kansas Rep. Richard Carlson, a Republican who is chairman of the House Taxation Committee. "I maintain we cannot support those core services of government unless we grow the private sector."

The fate of Missouri's tax cut may rest with a few House Republican holdouts. A veto override requires a two-thirds majority — meaning all 109 GOP House members must vote for the override if it is to succeed without Democratic support. Republicans can afford to lose one of their own in the Missouri Senate and still override the veto.

Rep. Elaine Gannon, a retired teacher from Nixon's home town of De Soto, is one of the few Republicans to say she may vote "no." She cites concern about education funding.

"But boy, they're spending a heck of a lot of money" to persuade her to vote "yes," Gannon said.

Rep. Lynn Morris is leaning toward a "yes" vote despite hearing a personal plea from Nixon and getting targeted with fliers, phone calls and emails from tax-cut opponents.

"I'm sad that we've got two different groups spreading such a diverse amount of information out there," Morris said. "It's even confusing to legislators — I'm sure it's confusing to the public.

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Christopher Foote August 27, 2013 | 1:44 p.m.

The states that ALEC champion for passing or adhering to their legislative policy recommendations (such as cutting income taxes) do poorly when assessed for a variety of economic indicators:
Cutting state income taxes is not the solution to Missouri's fiscal/employment problems. Contra right wing talking points, tax cuts reduce revenue. I don't think one of our problems is excess revenue. If tax cuts had a significant impact on the employment landscape, we should have a record low unemployment rate. Starting in 2001 with Bush and continuing with Obama we have had record tax cuts. Unfortunately, these cuts have not translated into robust job growth. In the last 20 years our greatest job growth has coincided with the highest tax rates (during Clinton's presidency) and were directly preceded by tax hikes in 1993.

(Report Comment)
Jimmy Bearfield August 27, 2013 | 4:10 p.m.

Chris, did you take the mortgage deduction on your 2012 taxes?

(Report Comment)
Christopher Foote August 27, 2013 | 7:50 p.m.

Uh Jimmy, no I did not, but thanks for asking. I took the standard deduction (like I do every year) because those solidly in the middle class see precious few tax credits. At a 3% interest rate one would need to borrow around $300,000 and thus pay $10,000 in interest to make it worthwhile (standard deduction =$13,000). Note the median sales price of a home in Columbia is around $150,000. Perhaps after I make my first million from snarky web comments I will take advantage of the government largesse that accrues to the well to do. But even then I would still oppose tax cuts, because our state is underfunded and poorly in need of additional revenues...not less!

(Report Comment)
Jimmy Bearfield August 27, 2013 | 10:12 p.m.

Uh Chris, the middle and lower classes are the ones who receive the most government spending: up to $8 for every $1 in taxes paid. In fact, the vast majority of those who pay no federal income taxes make $50K or less. Precious few tax credits . . . what bunk! Time for you to pay your fair share.

(Report Comment)

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