During the 2013 session, the Legislature passed House Bill 253, a sloppily drafted bill that will cost the state more than $800 million per year when fully implemented. The Governor, believing that HB 253 will decimate essential state services, endanger our AAA credit rating, and unnecessarily raise taxes on the elderly, rightly vetoed the bill, but legislative leaders plan to attempt to override his veto in September.
Beyond its devastating ramifications for critical state services upon which all Missourians rely, HB 253 is rife with problems ranging from increased taxes on seniors to a retroactive tax cut that would create a tremendous blow to the state budget. These problems result either from sloppiness or bad policy ideas; either way, given the bill’s negative impacts, I urge my colleagues to let the veto stand.
In what is said to have been the result of a drafting error, HB 253 would impose the state sales tax on prescription medicine and textbooks. While the thousands of mid-Missourians whose income is primarily comprised of pensions from the State, the University, teacher retirement or Social Security will not see any benefit from tax cuts, they will pay more for prescription medicine. To see what this might mean for my constituents, I asked my pharmacist to calculate how much more I would pay for the medicine I now take as a result of a recent minor heart attack. She tells me my annual bill would be about $140 higher. While the size of this tax increase will vary among people, the bottom line is that HB 253 is a significant––and unnecessary––tax increase for many older Missourians.
Besides its inadvertent tax increases, HB 253 puts vital state services at risk through its tax cuts. In addition to cuts to individual and corporate income tax rates, the bill also exempts half of all business income from taxation. Though proponents maintain that cuts would only occur if state revenue targets are met, this so-called “trigger” does not apply to its business income provisions, which are the most costly provisions of the bill. As a result, the “trigger” is essentially meaningless at preventing enormous cuts to critical state services.
Another troubling aspect of the bill is the extent to which future income tax rate cuts apply retroactively. Though tax bills normally are clear regarding when various tax rates apply, HB 253 is ambiguous with respect to the impact of tax rate reductions resulting from federal action on the Marketplace Fairness Act (Internet Sales Tax). A fundamental principle of Missouri’s law on retroactive taxes is that any ambiguity with regard to taxes is to be construed against the government and in favor of the taxpayer (See Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758, 769 and Savannah R-III School Dist. v. Public School Retirement System of Mo., 950 S.W.2d 854, 858). Given precedent, I think it is clear that when the federal Marketplace Fairness Act goes into law, the state will experience a $1.2 billion blow to its budget. But even for those who disagree, the ambiguity principle certainly still applies; and it is undeniable that a $1.2 billion unresolved question makes for bad tax policy.
The reasons for the veto to stand are many. The sloppiness of HB 253 alone warrants opposition. Careless policymaking created a $1.2 billion discrepancy that was never addressed or even considered. The new sales taxes on prescription drugs and textbooks were “mistakes” that will result in a $300 million tax increase that was never debated.
Politicians are fond of saying that government should behave more like business. The sponsors should thank their lucky stars that it does not; we all know what would happen to employees in the private sector who made a multi-million dollar error in tax planning––they would be fired on the spot.
No rational legislator should consider voting to override a veto on a bill that is this badly written. The legislature should be ashamed of itself for considering it.
Finally, HB 253 is a textbook example of the abuse of money in the political process. Although the bill will financially harm state employees, the elderly, college students, our public schools and universities, the mentally ill, and Missouri public safety, it will help a few very high-end taxpayers a great deal. Rex Sinquefield, one extremely wealthy Missouri taxpayer, has poured more than two million dollars into the political coffers of the bill’s supporters. We will never see a better example of the corrosive effect of big money on our political system.
Because of its negative effect upon state services, because of its negative effect on senior citizens, because it is so sloppy and because it is a classic example of financial corruption in politics, the legislature should sustain Governor Nixon’s veto.