JEFFERSON CITY, Mo. — Just months after the General Assembly passed the largest tax cut in state history, the Missouri House approves another round of cuts.
By a party-line vote, the lower chamber approved a proposal Thursday to reduce Missouri’s income tax rate, cut the corporate income tax and eliminate the tax on social security. While some Republicans say it was a priority, Democrats warn this could hurt the state financially in the future.
“It may be the largest, most irresponsible thing that we could possibly be doing at this moment,” House Minority Leader Crystal Quade, D-Springfield, said after Thursday’s vote.
This tax cut package comes less than six months after the governor called a special session to lower the income tax rate. This session, it’s priority for some GOP members to slash the rate again.
“This legislation will bring with it new jobs, higher wages and overall growth to our state’s economy,” Rep. Dirk Deaton, R-Noel, said
During the special session in October, lawmakers approved to drop the state’s income tax rate from 5.3% down to 4.95%, with four additions cuts, to 4.5%. Deaton’s bill would drop the rate down immediately to 4.5% and then, with additional cuts, take it down to 4.05% if certain revenue growth is met.
“We believe the people deserve more and we believe we can do better,” House Speaker Dean Plocher, R-Des Peres, said. “This tax cut stems from the dialogue last fall. Numerous elements that were discussed with the tax cut in the fall were included with the idea that they could be included at a future date.”
This legislation also would lower the state’s 4% corporate income tax rate down to 2% starting in 2024. Then, beginning in 2025, the rate would drop to 1% if the state hits a certain revenue threshold with the goal of eliminating the tax all together in the future.
“Cutting taxes isn’t how you’re going to bring Missouri businesses,” Rep. Deb Lavender, R-Manchester said. “We have the lowest tax structure of the states around us. It would be nice if once you tried something different than offer a historic tax cut that just keeps us living in poverty as a state.”
Corporate taxes brought in more than $909 million last year. It’s estimated that cutting the tax in half would cost the state $355 million annually.
“If we can’t afford to give teachers a pay raise, how in the world can we afford a billion-dollar tax cut that is going to be ongoing?,” Rep. Peter Merideth, D-St. Louis said on the House floor. “It’s bad policy. We haven’t even seen the impacts of the “historic tax cut” you all passed just a few months ago.”
Earlier this year, the state recorded a $6 billion surplus in the state treasury. While the legislation passed with a vote of 111-48, there was a provision both side of the aisle said they supported
“Seniors who’ve worked hard all their lives paying taxes, their entire working careers, it will eliminate all taxes on their hard earn social security benefits.” Deaton said.
That part of the bill is estimated to cost the state $144 million annually.
“We’re putting money back into our economy, with the taxpayers, were it originated from,” Rep. Ben Baker, R-Neosho said.
While Missouri state workers and teachers are among the lowest paid in the nation, Democrats say the $6 billion in the bank should be used on investments instead.
“This is an opportunity to stand with the voice we hear every day who say we need livable wages,” Rep. Yolanda Young, D-Kansas City, said. “I fear we will regret this later.”
Overall, the price tag of the legislation is more than $1.3 billion when fully implemented. This comes at a time when the General Assembly is also working on its largest budget in state history.
Back in January, the governor asked lawmakers in his State of the State Address to spend more than $51 billion to increase childcare subsidies, widen I-70 and expand pre-k. The House plans to debate the budget on the floor next week.
The bill is now headed to the Senate, where lawmakers have until May 12 to get it to the governor’s desk.