JEFFERSON CITY, Mo. (AP) – A day after senators endorsed a tax cut plan, Missouri Gov. Jay Nixon said Thursday that any discussion of tax cuts “is a nonstarter” until lawmakers first curb the amount of tax breaks going to commercial and residential developers.
Nixon’s brief written remarks stopped short of directly saying he would veto the legislation given initial approval by the Republican-led Senate, if it makes it to his desk.
But the Democratic governor spiked a tax cut bill last year and has previously threatened to do so this year unless the new measure meets several criteria.
Among other provisions, Nixon wants any tax cut to be contingent upon full funding for public schools and new limits on tax credit programs for the development of low-income housing and historic buildings. He noted that Republican State Auditor Tom Schweich recently released reports describing those two tax credit programs as inefficient and among the most expensive of their kind nationally.
“Until the General Assembly takes action to protect Missouri taxpayers and reform this out-of-control spending, discussion of tax cuts is a nonstarter,” Nixon said.
The Senate’s proposed tax cuts are not contingent upon the enactment of new tax credit limits or increased school funding.
But Republican Sen. Will Kraus, of Lee’s Summit, who is sponsoring the legislation, has said a delayed effective date for the tax cuts provides time for lawmakers to boost school funding and curb existing tax credit programs.
The bill could gradually cut the state’s top individual income tax rate to 5.5 percent from the current 6 percent, beginning in 2017. It also could phase in a 25 percent deduction for business income reported on individual income tax returns and add a $500 tax deduction for lower-income individuals.
Each step of the five-year phase-in of the tax cuts would occur only if state revenues grew by at least $150 million over their high mark in the previous three years.
The tax cuts are half the size as originally proposed under legislation endorsed in January by a Senate committee. The bill is projected by legislative researchers to eventually waive a little less than $500 million annually.
Republicans have been pursuing a tax cut, in part, because of recent income tax cuts in neighboring states such as Kansas.
“It’s not as ambitious as I would like,” Senate President Pro Tem Tom Dempsey, R-St. Charles, said Thursday. “I don’t think it would necessarily create the kind of change that would really move our state forward in terms of a competitive environment with our neighbors. But we’re moving in the right direction.”
The House already has passed two versions of a tax cut plan. One is targeted solely at businesses and is projected by legislative researchers to reduce state revenues by up to $350 million annually. The other would cut taxes for individuals and some businesses and is estimated to reduce revenues by more than $700 million annually when fully phased in.
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