JEFFERSON CITY, Mo. — On Tax Day 2018, the Missouri House voted to slash individual and corporate tax rate in a massive bill that moves to overhaul the state revenue system.
Speaker Pro Tem Elijah Haahr’s bill — the only one he filed this session — was given final approval by the House in a 91-61 vote. The perfected bill came to the floor with a 72-page fiscal note attached.
Under the bill, general revenue would bring in $30,729,357 less in FY 2019, $237,120,782 less in FY 2020, and $129,595,627 less in 2021. After full implementation in FY 2023, general revenue would then see an uptick of $23,020,264, according to the fiscal note.
The analysis has the bill having a net positive effect on other state funds of $78,903,769 in FY 2019, $201,228,893 in FY 2020, $204,227,583 in FY 2021, and $204,224,049 in FY 2023.
However, an amendment approved on the floor on Tuesday delays the implementation of the tax cuts to FY 2020. It is unclear how that will affect the fiscal analysis figures.
The fact that the legislation has so many moving parts and that it is so complex had some questioning the accuracy of the fiscal note.
“The fiscal note is wrong,” said Rep. Kip Kendrick, ranking minority member on the House Budget Committee. “It’s just how much is it wrong.”
Some revenue-generating portions of the bill — such as the state entering the Streamline Sales and Use Agreement — are contingent on the U.S. Supreme Court uphold the Quill decision by the ruling in South Dakota v. Wayfair, Inc.
Entering the streamline agreement is expected to bring in $21.2 million in total revenue to Missouri in FY 2021. $3.8 million in potential revenue through ending the sales tax exemption on textbooks is also dependant on the Supreme Court decision, the fiscal analysis notes.
A bipartisan consensus was that entering the streamline sales tax agreement would be a boom for the state and something that Missouri should do whether or not this tax overhaul makes it across the finish line this year.
But liking that provision wasn’t enough to garner Democratic support.
“We have had more than a decade to pass the streamline sales tax agreement and it has come from both sides of the aisle. People that authentically cared about that issue,” Rep. Tracy McCreery said. “I’m not fooled by the sudden interest in the streamline sales tax. I think it is being used in a smoke and mirrors kind of way to distract from the negatives of this bill.”
Rep. Crystal Quade also took issue with the portion of the bill eliminating the Senior Property Tax Credit for those who rent. The fiscal analysis estimates this will increase state revenue by $53.9 million in FY 2020.
“Low-income seniors, for me, as you probably know, is not a place I would like us to go,” said Quade. “There are a lot of provisions to this bill, some of the I like. This one for me is a pretty hard non-starter.”
The circuit breaker credit for renters is philosophically inconsistent according to Haahr.
“I think the way we appropriate this tax credit for renters is fundamentally against the point of the underlying tax credit,” said Haahr. “The whole point of the tax credit is to reimburse people for property taxes if you are renting you are not paying property taxes.”
Another point of dispute was the source of funding for roads and bridges. Haahr’s bill moves to generate revenue for Missouri’s infrastructure through an increase in automobile fees.
This puts all the burden of funding the highways on Missourians, instead of those who use them including out-of-staters, according to opponents of the provision. They argue a gas tax — like in the Senate version of tax overhaul — would proportionately put the funding to everyone who uses it.
With increased fuel efficiency and increased popularity of electric vehicles, Haahr calls a gas tax a relic of a bygone era.
An increase in fees is still an increase in taxes, McCreery points out calling it a “feel-good way” to do so.
The main provision — which decreases individual and corporate tax rates to 5 percent — gathered a lot of support in the body, particularly from Republicans.
“Very rarely in this chamber do I feel like we have an opportunity to give people back more of their own money, to give them more of their own freedom, for their individual preferences to direct their economic activity as opposed to the preferences of the state,” Rep. Phil Christofanelli said. “This is an opportunity to do this. It is a tax cut for working families.”
Under the tax cut, a single parent with one child earning $30,000 a year would save $313 on their state taxes, according to Haahr.
“Our goal in this is to provide a better tax policy framework for the state of Missouri moving forward,” said Haahr. “And that is not a one-year problem or a two-year problem, that is a 10-, 50-, and a 100-year problem. That’s what we are trying to do. We are trying to create a system that can be sustainable for a 21 century Missouri.”
After more than two hours of debate on the legislation is was sent to the Senate. The fate of the bill moving forward is uncertain.
The Senate has their own version of a tax overhaul in the form of Sen. Bill Eigel’s bill. The bills differ in tax cut rates and the mechanism for funding roads and bridges — the Senate bill relies on a gas tax increase.
The Senate spent less than 30 minutes perfection their version, which has yet to come up for third read.