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UPDATE: New tax cut plan criticized in Missouri Senate

Wednesday, March 5, 2014 | 5:30 p.m. CST; updated 6:02 p.m. CST, Wednesday, March 5, 2014

JEFFERSON CITY — A new plan making potential income tax cuts contingent upon a variety of factors, including school funding, faced criticism Wednesday from both Republicans and Democrats as the Senate struggled to reach consensus on what GOP leaders have labeled as a top priority.

The revised legislation put forth by Republican Sen. Will Kraus stems from negotiations with Democratic Gov. Jay Nixon. The governor, who vetoed a tax cut plan last year, has said that he won't sign one this year unless it's linked to higher school funding, new limits on existing tax credits and continued growth in state revenues.

Kraus' legislation attempts to satisfy those demands.

But several of his fellow Republicans opposed making the tax cut contingent on other factors, while some Democratic senators denounced the bill as benefiting the rich more than the poor.

Kraus said his latest plan would reduce state revenues by less than $400 million annually when fully implemented.

It would reduce Missouri's top individual income tax rate — currently set at 6 percent — by one-quarter of a percentage point, but only after revenues rise by at least $200 million and the Legislature fully funds public schools. Without an increase, Missouri's school funding next year is projected to fall $556 million short of what's called for under a 2005 law.

Kraus' legislation also would cut the top individual income tax rate by an additional 0.15 percentage points and create a new 25 percent tax deduction for the first $100,000 of business income reported on individual income tax returns.

But those measures would take effect only if legislators lower the amount of annual tax credits that can be awarded to certain developers. The tax credit cap for historic buildings would have to be reduced from the current $140 million annually to $90 million, and a currently unlimited tax credit for low-income housing developments would have to be capped at $110 million annually.

The contingencies would satisfy Nixon's desires with one key exception. The Democratic governor has expressed opposition to any tax break for business income reported on individual tax returns.

Yet, Kraus said: "At this point, I believe the governor will sign the bill."

Other Republicans doubted that Nixon would sign the measure and suggested that lawmakers shouldn't try to appease him.

"If we're going to do a tax cut, let's just do a tax cut," said Sen. Kurt Schaefer, a Columbia Republican who is chairman of the Senate Appropriations Committee. "Stop all of this, 'if this happens, then that happens ... and if somebody stands on their head on Tuesday, we get a tax cut.'"

Democrats criticized the legislation for cutting taxes on the top income tax bracket — currently set at all income over $9,000 — without providing any tax relief specifically targeted at the poorest residents.

"The way I see it, you're basically giving to the rich and taking from the poor," said Sen. Jamilah Nasheed, D-St. Louis.

Senators quit their debate without voting Wednesday after Republican Sen. Eric Schmitt, of Glendale, sought to replace Kraus' legislation with a more expansive tax cut. Schmitt's proposal would lower Missouri's top individual income tax rate to 5.5 percent in 2015, then gradually reduce the top tax rate to 4 percent rate if state revenues continue to grow by at least $100 million annually.


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