JEFFERSON CITY, Mo. — An error in the fiscal analysis of a bill could have cost the State of Missouri more than $50 million in revenue.
A bill aimed at reducing the corporate tax rate while staying revenue neutral made it through the Senate and a House committee before the mistake was realized. Sen. Andrew Koenig’s SB 884 would have slashed the corporate tax rate from 6.25 percent to 3.5 percent while changing how multi-state corporations calculate taxable income so that the state didn’t take a significant budget hit.
When the bill left the Senate in April, the fiscal analysis projected that it would actually bring in $10 million into the state. However, a new analysis projected it just decrease revenue anywhere from $28.5 million to $52.4 million.
The Department of Revenue discovered the error after a House committee hearing, but since the House was moving forward with a substitute the department considered the old Senate version no longer relevant. The department had updated the fiscal note on the House version last week.
Rep. Scott Fitzpatrick became aware of the discrepancy on Wednesday morning when he discussed how the bill would affect the budget with budget and planning officials.
“Had I not asked about it, we’d have probably passed that bill yesterday,” Fitzpatrick said.
Rep. Kip Kendrick accused the agency knowing about the error and not properly disclosing it to the legislature.
“The fact is, they knew about this, and they sat on it. They sat on this information. They did not make this information known to anyone in this body — anyone,” Kendrick said.
“I think people should lose their jobs,” he went on to say. “I think people should lose their jobs over this.”
In light of the mistake, which dominated the debate on Thursday, the House failed to adopt the House Committee Substitute and opted to amend the Senate version of the bill.
Rep. Crystal Quade proposed only reducing the corporate tax rate to 4.2 percent, however, the body decided to go with Fitzpatrick’s suggestion of 3.9 percent.
Cutting the corporate tax rate to 3.9 percent can sling revenue from $2 million in gains to $15 million in losses.
“This is crazy,” said Rep. Kevin Engler. “We don’t know what this is going to do, but let’s vote on it.”
The bill passed the House with a 92-11 vote and headed to a conference since the Senate refused to accept all the changes.
Following the conference, the Senate proceeded to take up the bill once again late Thursday night.
Sen. Scott Sifton noted that there was another bill in the House that called for a 3.5 corporate tax rate, saying that there was a chance that a worse version could pass.
“I”m fearful that if we don’t have 18 votes, we will have an even lower corporate rate,” Sifton told his colleagues.
“It may be easier, but is that in the best interest of the state?” Sen. Gary Romine asked.
Sen. Andrew Koenig said that he had been informed by House leaders that if his bill failed, the House would pass SB 674 instead. He told the Senate that he believed that his 4 percent rate would be revenue neutral.
Sen. Jill Schupp lamented the position the body had been put in because of the error, saying they had been deprived of their rights to make a good and informed decision because no one had stepped forward two weeks ago to acknowledge the error.
“It’s not your fault we had inaccurate numbers,” Schupp told Koenig. “What price does Missouri pay? What is this reduction in the corporate tax rate going to get us? Creating new jobs is a measurable thing, bringing in more revenue is a measurable thing.”
“It’ll make our state more competitive,” Koenig said. “My goal is to expand economic development in the state.”
“What else is wrong?” Schupp asked. “We didn’t need to be in this place. We’ve been left in a position that is untenable.”
“I’m really disappointed that we’re considering a bill this late that could have a negative effect on our budget,” Sen. Doug Libla said. “We can’t just trust that it is going to go down. What if it goes up?”
“I think we’re being premature in the passing of this bill,” Romine said.
Before putting it to a vote, Koenig told his colleagues that there was just as much chance of this generating money as there was of it losing money.
It passed with a vote of 23-9, with Sens. Curls, Hummel, Libla, Nasheed, Rizzo, Romine, Schupp, Sifton, and Walsh all voting against the bill.
When the bill came back to the House on Friday for a final vote, it passed with little debate in a 96-42 vote.
“I’m thankful we were able to find a compromise,” said Quade.
Benjamin Peters also contributed to this report.
Alisha Shurr is a reporter for the Missouri Times and Missouri Times Magazine. She joined the Missouri Times in January 2018 after working as a copy editor for her hometown newspaper in Southern Oregon. Alisha is a graduate of Kansas State University. Contact Alisha at firstname.lastname@example.org.