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Senate, Governor look to reform Missouri taxes, but which version will advance?

  

JEFFERSON CITY, Mo. – Nearly every Republican in an elected office can agree that modifying or changing the existing tax structure is beneficial to improving the lives of Missourians and making the Show-Me State more attractive to businesses.

But the question right now is: which proposal is the best way to do that? It seems that the two real options are either the proposal of Gov. Eric Greitens or a Senate proposal comprised of a merging of the bills sponsored by Sen. Bill Eigel and Sen. Andrew Koenig.

Sen. Andrew Koenig presents his tax reform legislation before the Senate Ways and Means Committee. (Benjamin Peters/ The Missouri Times)

Of the two, the Senate version seems to have the upper hand right now, as it looks to move out of a Senate committee this week.

“I think the legislature is going to lead on the issue of tax reform,” Eigel said. “That conversation has been going on for many months, and we’re going to continue to do that.”

One week after canceling a statewide tour following the news of a 2015 extramarital affair, Greitens unveiled his plan in late January at a series of stops at various businesses and manufacturers across the state, outlining an $800 million proposed tax cut that the Governor said would be revenue-neutral.

Under the Governor’s plan, the state’s top individual income tax rate would be reduced from 5.9 percent to 5.3 percent, and the corporate income tax would drop from 6.25 percent to 4.25 percent.

To be truly revenue neutral, any tax reform proposal would not require any cuts. Greitens’ proposal would eliminate the tax incentives for businesses to pay sales taxes quickly and trim state income tax deductions based on the federal tax payments. In addition to this, the proposal calls for Missourians to pay sales taxes on online purchases.

Greitens’ proposal initially received support from several groups, including the Missouri Chamber of Commerce and Industry, but has also been challenged on the numbers. An analysis by the Missouri Department of Revenue shows a total cut of $374.6 million, less than half of the $800 million Greitens spoke of. The Governor’s spokesman Parker Briden told the St. Louis Post-Dispatch that the numbers did not show all of the factors involved in the equation, reaffirming that the overall cut for taxpayers would be $800 million.

Meanwhile, Missouri senators have been working on their own means of addressing the question of how to reform taxes since the end of the last legislative session.

Sens. Bill Eigel and Andrew Koenig both presented their proposals before the Senate Ways and Means committee on January 16, but their bills have not progressed out of that committee since that day.

Eigel, Koenig tag team tax reform in Senate Ways and Means Committee

That’s because the two senators have been working together with other members of the body in order to combine the two pieces of legislation into a measure that accomplishes the goal while endeavoring to find common grounds that may be more amicable to members of the legislature.

The hybrid plan takes pieces from both Eigel and Koenig’s plans, as well as portions from the proposal of Governor Greitens, and is expected to come up for a vote before the Senate Ways and Means Committee this week.

“We worked very hard this week and we’re in a good place where I think we’ll see a Senate compromised tax reform bill move forward in the Senate,” Eigel said while appearing on This Week in Missouri Politics, thanking Sens. Koenig, Bob Onder and Wayne Wallingford for their work in getting to a compromise.

Eigel said the compromised bill would be close to revenue-neutral, while still also being the largest tax cut Missourians have seen.

Sen. Bill Eigel rises to present his tax reform legislation before the Senate Ways and Means Committee. (Benjamin Peters/The Missouri Times)

“They’re going to see it in their paychecks every time they take home pay to their families,” Eigel said. “This will completely eliminate the bottom three tax brackets of the Missouri income tax code.”

Eigel says that their proposal would take the income tax rate down to 5.2 percent in the first two years of the bill’s enactment, while also making the state more attractive to businesses. The corporate rate would drop two percent, from 6.25 percent to 4.25 percent under the Senate plan.

To truly make it revenue neutral, the money would need to come from somewhere. Eigel says that one fix is by taking the way businesses report their taxes and apportionment.

“A lot of states that are able to avoid Missouri taxes, that are out-of-state corporations, are going to have to start paying taxes,” he said.

He also said that by making the fuel tax part of the bill, it will also help address the issues of funding and infrastructure.

But still, some are still leery of the prospect of any tax cuts. In a press conference, Senate President Pro Tem Ron Richard told reporters that he was still nervous on this issue.

“I’m still nervous about a tax cut when we have an existing tax cut already going on,” he said. “We’ve got an unknown quantity from the feds. I’m a little nervous about the certainty of that. We’ve got proposed cuts to higher education when everybody is hollering about a trained workforce. I sure don’t want to leave this place in trouble on revenue.”

“I think the Senate is going to make good on the Governor’s promise for a bold tax plan,” Eigel said. “There’s room for the Governor to be a part of this discussion, and I certainly welcome that, but the plan we’re going to see moving forward will look a lot different from the Governor’s plan.”