While U.S. Senate Republicans ironed out last minute changes to a tax plan they passed Friday, a Missouri GOP Senator filed a bill to drastically overhaul the state’s code.
Freshman lawmaker Bill Eigel of Weldon Spring has proposed making $1.2 billion in tax cut to a state General Revenue stream that totals $9.4 billion.
His Missouri Economic Relief Act (MERA) would start by eliminating the bottom four brackets of the income tax code. Missouri has 11 brackets in all, with the bottom four dealing with taxable income of $4,000 or less.
Most Missourians fall in the top bracket, which covers incomes over $9,000. It starts at an amount more than $3,000 below the federal poverty level of $12,060.
Eigel admits the provision to dump the four lowest brackets is largely a symbolic gesture, but says it’ll still have a positive impact on those people with extremely low incomes.
“I think it’s not the right perspective to look at that and say ‘Well, you’re only collecting $90 a year on those first four brackets’,” said Eigel. $90 a year to a Missouri household, that could be a big deal. And it is a big deal for a lot of households.”
A major component Eigel’s tax package is a reduction in the income tax that most all Missourians pay from 5.9%-to-4.8%. His proposal far exceeds a law passed in 2015 that recently brought the rate down from 6%-to-5.9%. It triggers a modest .1% cut when certain tax collection benchmarks are met.
Eigel says his plan restores 90% of the $1.2 billion lost in tax cuts largely by cutting exemptions.
Under his proposal, Missouri will no longer offer a federal tax deduction to taxpayers, which currently tops out at $9,300. Doing so brings back $590 million to state coffers.
Eigel’s blueprint would also do away with a 2% deduction businesses get when they pay in sales taxes they’ve collected on time. The move would return around $115 million to the state ledger.
In addition, Eigel’s plan calls for the motor fuel tax to be raised by 6 cents. Although this money would, by law, go toward transportation spending and wouldn’t help balance the state budget, Eigel contends it’s a fair arrangement for taxpayers.
“From the perspective of a taxpayer, or all the taxpayers combined, you have a certain amount of revenue reductions on one side, and a certain amount of adjustments on the other side.”
Offering to boost the fuel tax is noteworthy in Eigel’s case. As a member of a transportation task force, he’s been strident in his opposition to any upward adjustment of fuel taxes.
The 23rd District Senator’s proposal also caps all state tax credits, although it’s unclear how each credit would be impacted.
Overall, the footprint of his package leaves the state in a deficit.
But Eigel claims the shortfall won’t be difficult to bring into balance. “The gap that’s left over, which would technically have to be accommodated via other reductions or considerations in general revenue represents less that 1.5% of our total general revenue income for any given year.”
Eigel claims the gap in the budget his plan would leave, which he estimates to be $150 million, would be more than offset by the growth in revenue collections. The state’s revenues are projected to grow by 3.3% over the next year, which would amount to an additional $370 million to the bottom line.
The St. Charles County small business owner also added a provision to his bill in the past few weeks that addresses a $1 billion hole the Congressional plans would dump into Missouri’s budget.
The Republican tax measures in Washington double the standard income tax deduction for filers who choose not to itemize their returns. The Missouri rate for state taxes, by law, is tied to the federal percentage. Eigel’s bill has a provision to decouple the state from the federal rate.
About his proposal in general, Eigel contends all the elements of his tax plan must be included in the final product if it’s going to have a chance of passing.
“You can’t take out one piece or the other and try to pass them individually. It’s a major piece of legislation made up of major individual pieces. But the only way they work, the only way that I think there’s a path to get them through the general assembly is if they’re all in a comprehensive tax reform measure.”
But although he’s insistent the tax proposal remain whole, the eight-year U.S. Air Force Veteran says he fully expects it to undergo significant changes before becoming law.
“What I am not going to do is going to take the perspective that the bill as it stands right now, is the final bill that has to pass in that particular form. I really want an opportunity to solicit feedback, and make this a better bill that everybody can buy in in the Senate.”
(Jason Taylor, Missourinet)