AIM president Ray McCarty said today he was glad to see Governor Jay Nixon is participating in conversations to reduce the tax burden on Missouri taxpayers, but notes there is need for greater understanding of the types of taxpayers that would benefit from AIM’s tax cut proposals.
“Last week’s announcement by Governor Nixon is a good first step toward our goal of reducing the tax burden for all Missouri taxpayers, including Missouri employers, and increasing our ability to compete for jobs in a global economy,” said Ray McCarty, president of Associated Industries of Missouri.
Governor Nixon recently issued a statement in which he says, “I have never been opposed to making responsible changes to our tax code.” The governor requests cuts in tax credit programs and full funding of the foundation formula for K-12 education. He cites legislation that will be sponsored by Senator Will Kraus that will include these components and a requirement that state revenues grow by more than $200 million before tax cuts take effect.
But the governor also said he was opposed to providing any tax reductions on “…what’s called ‘pass-through’ business income.” He continues, “…these tax cuts primarily benefit well-heeled corporate partnerships like law firms, and there is no evidence, anywhere, that these schemes do anything to create jobs.”
In fact, many businesses are organized as “pass-through” entities and would benefit from AIM’s business income deduction, such as that contained in HB 1253, sponsored by Rep. T.J. Berry, and SB 496, sponsored by Senator Eric Schmitt. This includes sole proprietorships in which one owner owns the business; partnerships where husbands and wives or multiple individuals own the business; subchapter S corporations; and other types of business organizations.
According to 2010 tax year data published by the Internal Revenue Service, only 16% of S corporations were “professional, scientific and technical” firms such as law, lobbying and accounting firms. Such firms also accounted for only 16% of the net business income of all S corporations. The remaining 84% of S corporation income was reported by manufacturers (16%), wholesale trade businesses (13%), healthcare professionals and hospitals (11%), construction businesses (8%), retail trade (7%), finance and insurance companies (7%) and the rest was reported by various other industries.
IRS data also confirm 94% of all businesses would benefit from the business income deduction supported by AIM for “pass-through” entities. AIM supports broad-based tax relief that would help ALL businesses in Missouri, including regular corporations that are responsible for nearly one-fourth of all net income reported on tax returns.
“Associated Industries of Missouri will continue to work toward a balanced and measured approach in providing tax relief that will help Missouri job creators be more competitive in the global marketplace, and we look forward to continuing the conversation with the governor and all legislative leaders in the coming weeks,” said McCarty.