The Missouri House has given first-round approval to two separate but similar tax-cut bills.
Both bills would create tax breaks for business income that's reported on individual income tax returns. They differ in this way: House Bill 1253 would pair the business income deduction with a tax cut on corporations, while House Bill 1295 would pair it with a cut to Missouri's individual income tax rate. State Rep. Andrew Koenig, R-Manchester, sponsored HB 1295.
"We happen to be in a situation where the states that are surrounding Missouri are committed to reducing their tax on production," Koenig said. "We are in a border war with Kansas, and if we do not act we will continue to lose jobs to Kansas, and to states like Tennessee that have no (state) income tax."
State Rep. Jon Carpenter, D-Gladstone, argued that both bills are deceptive.
"When you do a special exemption for people who call themselves business owners, and allow them to pay half the tax rate as the rest of us, what you do is you encourage people to call themselves business owners when they're not really," Carpenter said. "You and (your employer) might set it up to where now you've become a contract laborer, or maybe you're a consultant now, instead of an employee for the company...as a consultant you're a business owner, and so now you're getting taxed as a business owner instead of (as) an employee."
Carpenter and other Democrats say the proposals would cost the state hundreds of millions of dollars in revenue every year. House Bill 1253 is estimated to cost the state up to $347 million each year, while House Bill 1295 would cost the state more than $700 million a year.
Carpenter is also sponsoring the House Democrats' alternate tax cut proposal, in which the state income tax rate would be cut from 6 percent to 4 percent for citizens making $30,000 a year or less. Those making more than $300,000 a year would pay more, 8 percent, and those between $30,000 and $300,000 would pay the current 6 percent rate. Carpenter attempted to add his bill onto HB 1253 as an amendment, but it was ruled out of order.
Gov. Jay Nixon, a Democrat, vetoed last year's tax cut proposal (HB 253), which was sponsored by state Rep. T.J. Berry, R-Kearney -- he's sponsoring HB 1253 this year. Nixon said last week that he would veto any bill this year that deprives funding to public schools and universities. He has been in discussions with state Sen. Will Kraus, R-Lee's Summit, on a proposal that would allow for a tax cut once Missouri's formula for K-12 schools is fully funded.
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