Finance

Missouri Governor's Veto Sets up Showdown with Legislature

by | May 2, 2014
 

By Kevin McDermott and Virginia Young

Surrounded by developmentally disabled children in wheelchairs, Gov. Jay Nixon on Thursday announced his veto of a tax cut bill that he maintains would gut funding for them and other vulnerable Missourians in order to give generous breaks to the richest people in the state.

"Facilities like this exist because ... Missouri has made a commitment to these kids," Nixon said at an event at Gateway/Hubert Wheeler School for the Severely Disabled in St. Louis. "The services provided here at Hubert Wheeler stem from values we share not just as Missourians, but as human beings. And you know what? They aren't free."

Nixon's formal veto later on Thursday, which had long been expected, sets up a showdown between the Democratic governor and the Republican-controlled Legislature over the basic ideological divide of taxation.

Nixon called the bill "an unfair, unaffordable and dangerous scheme that would defund our schools" and weaken the economy. And he slammed its supporters for what he called "the politically driven pursuit of tax cuts at any cost."

"This is a bad bill, and deep down, even those who voted for it know it," alleged Nixon, who was visibly angry at some points while discussing the bill in St. Louis on Thursday. Nixon made the announcement at a school named after his late father-in-law, a former state commissioner of education.

Supporters of the bill maintained the bill is "responsible tax reform" that will "put money back in the hands of the people who earned it" and "act as an economic driver for the state of Missouri," as sponsor Sen. Will Kraus, R-Lee's Summit, put it in a written statement.

"I am hopeful that the General Assembly will quickly override the governor's veto and pass the first tax rate cut for Missourians in almost 100 years," Kraus said in the statement.

Republican legislative leaders said they will attempt a veto override next week. An override requires a two-thirds vote in each chamber.

In its main provisions, the bill would gradually reduce the state's top personal income tax rate to 5.5 percent from 6 percent. It also would phase in a 25 percent deduction for business income reported on individual tax returns.

The cuts would take effect in five annual steps beginning in 2017, so long as state revenue grew by at least $150 million a year compared to the high-water mark of the previous three years.

Nixon's eight-page veto message, released after he vetoed the bill Thursday afternoon in Jefferson City, calls it "an ill-conceived, fiscally irresponsible experiment" and "a disservice to the people of Missouri, and one in which I will not be complicit."

In the veto statement, Nixon says the bill would allow a casino owner with $1 million in income to realize an $18,000 tax cut due to the measure's generous provision for writing off "pass-through" income of business people. An average Missouri family making $44,000 a year, meanwhile, would see a tax cut of just $32 by 2022, says the statement.

"This unaffordable, unfair and potentially dangerous legislation will irreparably harm public education and the vital public services upon which many Missourians rely ... and provide extraordinary benefits to the few with little to the many," Nixon said in the statement.

A fiscal note pegged the cost at $620 million a year when fully implemented. Nixon, however, contends that the bill would wipe out the state's top tax bracket and cost the state $4.8 billion annually.

Nixon argues that the bill would not encourage economic activity. He pointed to Kansas, which eliminated taxes on "pass-through" business income a few years ago and is now seeing large revenue reductions.

This week, Moody's Investors Service downgraded Kansas' state bonds, which Nixon called "a dramatic step that will shift the tax burden to local communities. These folks in these rating agencies are not jokesters and this is serious business, very serious business," Nixon said at a news conference in his Capitol office.

The override vote is likely to be close. To succeed, the GOP needs 23 votes in the Senate and 109 votes in the House.

Republicans control the state Senate 23-9, with two vacancies, and the state House 108-51, with four vacancies. That means they must hold every Republican vote in the Senate and stick together in the House while picking up at least one Democratic vote.

The shadow of partisan politics has hung over the debate from the beginning, and it remained in place Thursday. "This should serve as a reminder to the people of our state about the importance of having a Republican governor," House Speaker Tim Jones, R-Eureka, said in a statement.

Rep. Jeff Roorda, D-Barnhart, provided the only Democratic vote in favor of the bill when it passed the House. He said Thursday that he had not decided how he would vote on an override.

Asked if he was getting pressure from the governor, Roorda said: "I'm getting pressure from everybody. I'm just listening to both sides."

Roorda said his vote could hinge on whether he believes Nixon's argument that the bill would eliminate the state's top tax bracket.

"If there's a chance that this really cuts general revenue in half, that would be devastating for people in my district as well as every other district," he said.

House Majority Leader John Diehl, R-Town and Country, said he would have to make sure all of the Republican members were present when they took the vote. One member, Rep. Rick Brattin, R-Raymore, was absent Thursday because of his brother-in-law's sudden death but was expected to return next week.

While declining to say which Democrat he's counting on, Diehl said: "I believe I have the votes."

But there could be a casualty.

If the income tax cut is enacted over the governor's veto, some Democrats are threatening to derail a transportation sales tax.

Democrats provided the crucial margin when that measure passed the House on a 96-53 vote last month. Next week the House will consider accepting the Senate's scaled-down version of the sales tax increase. If it passes, it would go on the November ballot.

Rep. Chris Kelly, D-Columbia, said he won't support the sales tax increase if the income tax cut veto is overridden.

"I can't raise taxes on senior citizens and drop them on lobbyists," Kelly said.

The tax cut bill is SB509.

(c)2014 the St. Louis Post-Dispatch

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