Missouri Senate panel passes bill to cut income taxes, raise gas tax

A Missouri Senate committee passed a tax reform bill Tuesday that would cut income tax rates but increase the fuel tax and start a process to collect sales taxes on online purchases.

The measure calls for cutting individual and corporate income taxes by $630 million, said state Sen. Wayne Wallingford, R-Cape Girardeau, who chairs the Ways and Means Committee.

The individual income tax rate would drop from 5.9 percent to 5.25 percent. The corporate tax rate would be lowered from 6.25 percent to 4.25 percent.

Wallingford estimated the tax cuts could amount to $500 a year or more for many Missouri families.

"There's going to be significant money in people's pockets," he said.

The GOP-dominated Ways and Means Committee approved the measure by a 5-2 party-line vote, setting the stage for future debate in the full Senate.

It was revised repeatedly over the past several weeks and incorporated ideas from several bills, Wallingford said.

The 421-page measure mostly mirrors Gov. Eric Greitens' tax reform plan, the senator said.

Wallingford said the biggest difference is the addition of a proposed, 6-cent increase in the gas tax phased in over three years.

If the plan becomes law, the gas tax would be increased by 2 cents as of Aug. 28, and then by another 2 cents a year later and a final 2 cents in 2020, the state senator said.

By phasing in the increase, the state doesn't have to obtain voter approval, he said.

A 6-cent increase, implemented at one time, would have required voter approval under the state constitution's Hancock Amendment, Wallingford said.

He said the state needs to increase the 17-cent-a-gallon fuel tax to make needed repairs to roads and bridges.

"Our infrastructure is so poor, and we have ignored it for so long," he said.

Under this measure, the tax would increase to 23 cents a gallon by Aug. 28, 2020.

When fully implemented, the fuel tax could generate an additional $183 million a year for road and bridge construction, he said.

Wallingford said the proposed increase in the fuel tax may draw opposition from the governor.

"I understand he is not a big fan," the senator said.

But without inclusion of such a tax increase in the measure, the committee might not have had the votes to pass it, Wallingford said.

The measure also would cap low-income housing tax credits at $135 million a year and offer an earned income tax credit for low-income families that would be tied to a percentage of the federal tax credit, Wallingford said.

To offset the cuts, the plan would replace the state's federal deduction for individual income tax filers with tiered deductions based on income levels. Wealthier taxpayers would receive no deduction, Wallingford said.

In addition to setting up the process to collect sales taxes on online purchases, the bill also would repeal a tax deduction businesses receive for paying their taxes on time.

The bill drew criticism Tuesday from the Missouri Budget Project, a St. Louis-based, not-for-profit public policy organization

Missouri Budget Project spokeswoman Traci Gleason said in an email to the Southeast Missourian that "changes to our tax system should create more fairness for Missouri families while also providing our communities and schools with the resources they need to allow families to prosper."

She said the Senate bill "falls far short."

Gleason said her group estimates the tax cuts would result in a net loss to general state revenue of $568 million per year when fully implemented.

But Wallingford disagreed.

"I don't think that's accurate," he said. "We made a conscious effort to make it as revenue neutral as possible."

mbliss@semissourian.com

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