JEFFERSON CITY, Mo – First-term Representative Jon Carpenter, D-Gladstone, has an alternative tax cut plan that was heard in the Ways and Means Committee on Tuesday.
HB 1328 uses a tiered system: 4 percent on a taxpayer’s first $30,000 in income, 6 percent between $30,000 and $300,000, and 8 percent on anything over $300,000.
“This is a tax reform measure that would cut taxes for 99 percent of Missourians in a way that is fiscally responsible and not blow a hole in the state budget,” Carpenter said.
Carpenter described the plan as revenue neutral. Although taxes would be cut for all but 1 percent of the earners in the state, taxes would increase for anyone making over $300,000. The increased revenue would offset the funding lost from decreasing taxes from the 6 percent now charged for anyone making over $9,000 a year.
The bill also restricts the amount that can be deducted in federal tax payments to $5,000. Again, Carpenter said the Missouri population with enough assets to have more than $5,000 worth of deductions is very small.
Committee members, especially committee vice chair Rep. Galen Higdon, R-Platte County, were concerned for the fiscal note for the bill, which lists a deficit of $174 million dollars in 2017. Carpenter said that the calculation was performed by University of Missouri -Economic and Policy Analysis Research Center and was one of many assessments he gathered for the bill. Carpenter said he did not agree that the cut would create that large of deficit in 2017, factoring in gains for the state through sales or property taxes by pumping money back into the economy.
“At least these dollars are going to every day Missourians,” Carpenter said. “There’s a case to be made that a tax break to middle to low income people is more likely to go back into the state.”
Carpenter’s bill is in contrast to Republican plans that call for a flat cut once a revenue trigger is met. Sen. Will Kraus,’ R-Lee’s Summit, bill, SB 509, originally called for a .1 percent tax decrease (through several years until the percentage drops to 5 percent of income for all Missourians) for every $100 million in revenue brought in by the state. Carpenter’s bill, as constituted does not have a revenue trigger, a chief concern of Higdon who suggested a $125 million revenue trigger.
Carpenter also made a specific point that his cut would create a smaller budget hole than Republican plans. He added that his plan is more focused on individuals instead of businesses, even though some business owners file returns individually.
“The vast majority of small businesses pay at an individual tax rate,” Carpenter said.
The larger goal of this bill is to update an antiquated tax program in Missouri. Currently, income is taxed in 10 brackets one for every $1,000 earned until $10,000. Carpenter said this was a progressive program when it was instituted, but is archaic with current incomes.
The committee took no action on Monday.