Despite Fears of Becoming Kansas, Missouri Cuts Taxes

Missouri Gov. Mike Parson on Thursday signed a bill that he says will provide both immediate and long-term tax cuts for Missourians.

By Tyler Wornell

Missouri Gov. Mike Parson on Thursday signed a bill that he says will provide both immediate and long-term tax cuts for Missourians.

The measure, House Bill 2540, passed 101-40 in the House and 24-9 in the Senate, will reduce Missouri's top individual income tax rate from 5.8 to 5.4 percent in 2019. The rate will further drop incrementally to 5.1 percent if the state meets certain revenue targets each year.

Parson was joined by legislators and business leaders at Hartman & Company Construction in Springfield for the signing, at which he said the cut will be the first step in tax reform.

"Our economy is at its strongest when the hard-working men and women of this country are not burdened by big government and increased regulation," Parson said. "The main ingredients to this responsible plan are ensuring we keep taxes simple and fair, while also ensuring we maintain our needs for key functions of government like infrastructure and education."

The bill signed Thursday was sponsored by Rep. Elijah Haahr, R-Springfield and was a pared-down version of his original, which had included provisions for a streamlined sales tax and increases to motor vehicle fees. Haahr's bill was one of several tax proposals that were floated during the recent session.

Haahr said his bill was a culmination of his six-year journey in the Legislature and will boost the economy.

"I think this sends a signal to the country that this is a good place to live and do business," Haahr said. "It's a really good economic development tool."

Mary Beth Hartman, president of Springfield-based construction company Hunter-Chase & Associates, said the tax cuts will deliver much needed relief to Missourians and allow businesses to invest future savings.

"When you're in business, any dollars that you can recapture that used to go into government, you can now keep for infrastructure in your own company," Hartman said. "This gives us relief from the burden of taxes and puts money back in our pockets to make those decisions that for decades, really, we've not been able to have any say over."

The state estimates the tax cuts will decrease general revenue by $5.8 million, but the Missouri Budget Project anticipates it will increase state revenue by $59 million because of provisions that phase out a federal income tax deduction and close loopholes.

At the end of the day, it won't mean much for low- and middle-income Missourians, Missouri Budget Project spokeswoman Traci Gleason said in an email.

"The combination of the phase out of the state deduction for federal taxes paid plus the downward shift in brackets offsets most of the tax rate reduction for most Missourians," she said.

The group expects the cuts to benefit wealthiest Missourians the most. It projected a $2,200 cut for someone earning on average $1.4 million per year.

As tax cut proposals were making their way through the Legislature this spring, Democrats warned that further reduction in taxes would lead to a crisis like that in Kansas. The steep cuts for businesses and individuals never materialized into economic growth and led to annual budget shortfalls, forcing the Kansas Legislature to eventually reverse the cuts.

But that won't be the case for Missouri, Haahr said.

"In Kansas, you had a full scale, almost elimination of the tax system," Haahr said. "This is nothing like Kansas. We were very careful in how we built this bill. We are going slowly, incrementally down. It's the safe way to do it, it's the healthy way to do it."

The tax cuts signed Thursday are in addition to a bill that reduced the state's corporate tax rate from 6.25 percent to 4 percent, signed by former Gov. Eric Greitens on his last day in office. Parson said he will continue to work with the Legislature on further tax reform and initiatives in the legislative session that begins in January.

"Reducing taxes is beneficial to Missouri families and will play a vital role in our state to restoring our economy," Parson said. "Make no mistake -- this is just the beginning for our plan to ensure Missourians keep more of their hard-earned money by offering broad-based tax relief as we move Missouri forward."

(c)2018 The Joplin Globe (Joplin, Mo.)

Caroline Cournoyer is GOVERNING's senior web editor.