The Missouri House of Representatives Thursday gave final passage to legislation that will give every business in Missouri a tax cut, no matter how large or how small.
By a vote of 103-51 the House sent to the governor a plan that will reduce taxes for the state’s S corporations, sole proprietors, partnerships, LLPs, LLCs and other flow through entities by 50 percent over five years. C-corporations would see their taxes reduced from 6.25 percent to 3.25 percent in as little as ten years. Individual taxpayers would see a one-half percent reduction in personal income tax rates over at least a ten year period, an increased personal exemption for lower income taxpayers, and an additional one-half percent tax cut if the federal internet sales tax bill becomes law.
The tax rate decreases would only be triggered by $100 million growth in general revenue collections from taxes and fees.
The bill will help Missouri compete with the dramatic income tax exemptions and rate cuts in neighboring states.
“This is a measured response to what other states around us are doing,” said Rep. T.J. Berry (R-Clay County) the sponsor of House Bill 253. “This is a fiscally responsible step in reducing our tax rates.”
Senators Will Kraus (R-Lee’s Summit) and Eric Schmitt (R-Glendale) led the fight for the bill in the upper chamber.
“The current tax structure is not working,” said Kraus. “We need to do something different. This bill will be a tax cut for every Missourian who pays taxes. This is a reasonable cut, and I think the governor should sign this bill.”
“This bill will make our state one of the most competitive in the country,” said Schmitt. “It is my intention to work with my colleagues and usher in a new era of growth and prosperity by bringing more investment, economic activity and jobs to the Show-Me State.”
The bill also includes a tax amnesty collection program, changes necessary to comply with the Streamlined Sales Tax agreement, nexus changes and a change in the withholding filing frequency that would allow those with less than $100 in withheld tax per quarter to file on an annual basis.
“This is an historic moment,” said AIM president Ray McCarty. “For the first time since the 1920’s, we are reducing taxes for all taxpayers and businesses. The result, we believe will be a better and more vibrant Missouri.”
Some changes in the Senate increased the fiscal responsibility of the measure, but those changes also made the tax cut more complicated. Each fiscal year, a calculation of state general revenue collections for the previous three fiscal years must be made. General revenue collections for the current fiscal year will be compared with these collections.
If the current collections are at least $100 million more than the highest of the previous three years, the tax rate cut would be allowed. If not, the rate would stay the same and the calculation would be performed again the following year. Because of this requirement, state revenues would have to grow by at least $1 billion for the tax rate cuts to be fully effective.
“While the calculation is cumbersome and complicated, we are happy that the business income deduction was preserved as we originally drafted it and that general tax relief has passed the General Assembly this session,” said McCarty. “We look forward to Governor Nixon’s approval of this responsible approach to tax reduction.”