Tax-cut supporters say it will boost economy, jobs

Uncertainty remains about the possibility of a veto override of House Bill 253 as the legislative session nears, yet many supporters of the income tax-cut bill aren't giving up their campaign.

As Missouri's governor continues visits throughout the state to shore up support for his side of the argument by presenting troubling education-funding scenarios as a result of the bill, a coalition of lobbyists, pro-business groups and legislators trying to spread a very different message: The bill will create a better tax policy for Missouri they say has seen success in nearby states.

The bill would phase in a 50 percent tax deduction for business income over the next five years, along with reducing the income tax rate by 0.5 percent for individuals and 3 percent for corporations over the next 10 years. For the cuts to go into effect, state revenue would have to rise by $100 million annually.

House Bill 253, say supporters, will stimulate the state's economy and draw new businesses, resulting in increases of revenue from income taxes and sales taxes. But Gov. Jay Nixon said the legislation could harm the state's ability to fund for education, to the tune of $450 million this year if a veto override occurs and Congress passes the Marketplace Fairness Act, which would allow states to collect taxes on online sales. Missouri would have to use the new law for the cuts to education funding to be that large. Without the act passing, DESE estimates the cut to school districts would be $260 million if House Bill 253 goes into effect.

Carl Bearden, executive director of United For Missouri, a lobbying group with the Grow Missouri coalition that was formed for the sole purpose of pushing for a veto of House Bill 253, disagrees with those numbers because he said they are based on a "static," or not growing, economy.

"Everybody in the country basically uses the same kind of modeling note when they forecast fiscal notes," Bearden said. "So what you're going to hear, and what those schools are being told, is that we are going to lose all this money, and if we do, we are going to lose funding for education. But we don't live in a static world. We live in a dynamic world."

Projections from opponents of a similar tax cut in Oklahoma also showed a large loss looming for state services, but a year after tax cuts went into effect, the state experienced a net increase of more than $350 million from more collections of sales taxes and income taxes -- a result, he said, of people having more money in their pockets to spend.

Supporters are betting on the tax policy to drive consumer spending and business expansion, which they say will create more jobs and increase sales and income tax revenue.

"There is some underestimation by opponents of the impact of this bill on small business and their ability to create jobs and hire people, resulting in more taxes being paid, more funding for education and more general revenue. The bottom line to this bill is not cutting this or giving this tax break; it is what we need to jump-start and help Missouri's economy," said state Rep. Kathy Swan, R-Cape Girardeau, who supports a veto override.

Area legislators say they have been at odds with educators about their support for the bill, but say Nixon is to blame when it comes to funding reductions for schools; the governor is withholding $400 million from the state budget because of his concerns about the pending legislation.

"[Educators] have come to me, and I listen, and I tell them why I voted for the bill originally, and why I am voting for the override," said state Sen. Wayne Wallingford, R-Cape Girardeau. "I like to look at economic principle and historic example to base my opinions on, supported by facts. So far I haven't seen any from the other side; it is just more "we are going to lose money," and I can't support that just because the governor told me so. I haven't seen any economic data or studies saying [schools] will be hurt by this."

Wallingford said he is among legislators who have voted for funding increases for K-12, higher education and scholarships.

"I tell them: 'If your money is being withheld, you need to go to the governor and ask why he is putting you in that position,'" he said he tells educators.

Wallingford, like Bearden, said budget studies don't go as far as they should when new tax policy is being debated.

"I haven't seen one yet that estimates how much more revenue there will be because of a new tax policy that prompts more spending in a local economy," Wallingford said.

Examples of other states using income tax cuts to create a boost in revenue are also being touted by the Missouri Chamber of Commerce, which is a part of the Grow Missouri coalition. The chamber recently pointed to Kansas, where income tax rates were reduced to 3.9 percent and 2.3 percent, and Oklahoma, which has gone from a 7 percent income tax rate to 5.25 percent this year and will go to 4.85 percent by 2016.

State Rep. Donna Lichtenegger, R-Jackson, said there is no reason the same thing can't happen in Missouri and calls the governor's campaign to oppose the veto override "scare tactics."

"You don't have to reinvent the wheel," she said. "There are states that are doing this, and they are doing just fine."

Bearden said one number shared by the governor -- a $692 million reduction for state services over 10 years -- is "probably pretty close to what the income tax rollback would be. But again, it's based on a static projection. It doesn't include any of the growth we know we are going to see in our economy and that have seen Oklahoma experience, and Kansas experience, and every other state experience that has cut income tax."

Although many legislators have supported a veto override during the upcoming session starting Sept. 11, doubt exists whether the issue will garner enough votes. To obtain an override, at least 109 legislators would have to vote in favor. This past week, at least six Republicans were still on the fence or have signaled opposition.

But Melanie Abrajano, executive director of another lobbying group in favor of a veto override, the Missouri Club For Growth, said she believes strong leadership and thinking about the potential loss for Republicans in upcoming elections will bring around party members to voting with the majority.

"I don't think any Republican is going to want to say they voted against a tax cut," she said.

Along with Wallingford, Swan and Lichtenegger, Republican state representatives Holly Rehder of Sikeston and Shelley Keeney of Marble Hill have indicated support for a veto override. Steve Hodges, a Democrat from East Prairie, and Dennis Fowler, a Republican from Advance, have said they will not vote to override the veto.

eragan@semissourian.com

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