JEFFERSON CITY — Democrats in the Missouri House are proposing to cut income taxes for many lower- to middle-income individuals and raise them for wealthier residents as an alternative to Republican tax cuts that are tailored more directly to businesses.
The Democratic plan outlined Monday faces long odds in Missouri's Republican-led legislature, which has made tax cuts a priority for the 2014 session. But it was an indication that the debate at the Capitol is now focused on how— not whether — to cut income taxes.
Democrats said their proposal would be "revenue neutral" for the state, meaning the tax cuts would be offset by other tax increases.
"Tax reform is important in this state — it's long overdue," said Rep. Jon Carpenter, D-Kansas City, who is sponsoring the legislation. But "it should be fiscally responsible, and ... the tax cut ought to go to everyday, hard-working Missourians."
Republican House Speaker Tim Jones said the Democratic embrace of a tax cut showed that Republicans "are winning the battle of ideas." But he said higher taxes on those with higher incomes could hurt small business owners who report their profits on individual income tax returns.
"When you 'tax the rich,' a lot of times you're talking about harming the backbone of Missouri's economy, which is our small-business owners," said Jones, of Eureka.
Missouri currently levies its highest tax rate of 6 percent on income over $9,000 annually, with reduced rates for earnings below that mark. The top tax bracket has remained unchanged since 1931, and the top tax rate has been fixed since the early 1970s.
Starting in 2016, the Democratic legislation would impose a tax rate of 4 percent for the first $30,000 of income, 6 percent on the remaining income up to $300,000 and 8 percent on all income over that.
The legislation also would reduce the amount of federal income taxes that Missourians can deduct on their state income tax forms, but it would create an additional tax deduction for people earning less than $15,000 annually.
"It's something that's going to give a tax cut to 99 percent of Missourians — not just to corporations," said House Minority Leader Jake Hummel, D-St. Louis.
Last year, Democratic Gov. Jay Nixon vetoed a Republican-backed bill that would have gradually cut the state income tax rate for both individuals and corporations and phased in a 50 percent tax deduction on business income reported on individual income tax returns. House Republicans fell short on a veto override attempt after Nixon highlighted several technical problems with the bill and raised concerns about the potential financial drain on education and other state services.
Republican House and Senate leaders have again made an income tax cut a priority but have yet to settle on a specific approach. Some proposals would cut tax rates for both individuals and businesses while other Republican proposals are focused solely on business taxes.
House Democrats said Monday that though their plan includes no corporate tax cut, it would aid a large number of small businesses whose annual profits are below $300,000.