Eight different business groups joined the Senate Ways and Means Committee as it heard Associated Industries of Missouri’s “Broad-Based Tax Relief Act today in the Capitol.
AIM, the Missouri Retailers Association, Missouri Grocers Association, National Federation of Independent Business, Kansas City Chamber of Commerce, Americans for Prosperity, the Missouri Society of Certified Public Accountants, and others testified in favor of Senate Bill 11, filed by Senator Eric Schmitt (R-Glendale).
“The theory is simple,” said Ray McCarty, president and CEO of AIM. “For less than three week’s worth of unemployment benefits per unemployed Missourian, the legislature can pass a bill to allow Missouri businesses to create jobs for those unemployed Missourians. Uncertainty at the federal level is stifling job creation. Missouri can offset that with real tax relief for every Missouri business.”
While discussion in the hearing focused on Senate Bill 11, two other bills were also heard. Senate Bill 26, filed by the committee’s chairman, Senator Will Kraus (R-Lee’s Summit), caps personal income taxes for the top two income brackets at five percent, provides LLCs with a 25 percent tax cut over five years and cuts some corporate taxes over three years.
Each of the eight business groups testified in favor of Senate Bill 11 and 26.
Chuck Pierce of the Missouri Society of Certified Public Accountants addressed what his members see on tax returns when they file business returns.
Something must be done to address the flow-through in returns. Seventy to 90 percent of businesses are flow-through entities. Most are small businesses, claimed Pierce.
Pierce went on to say that a majority of that money is reinvested in the business when CPAs do save business owners money on their tax returns. The flow-through that he addressed pertains to small business owners who file business income on personal tax returns.
“One of the biggest misperceptions on paper is that small business owners are making huge sums of money,” said AIM’s McCarty. “The federal government just passed a tax increase on anyone making over $400,000 or couples making over $450,000. A lot of those types of returns will be small business owners who must report business income on individual income tax returns. They struggle just like every other business to make payroll and afford other business expenses week-to-week.”
The two tax reform measures received some opposition. Missouri budget analyst Jim Moody provided testimony against the two bills.
Since 1997, Missouri has cut $1 billion in tax revenue, said Moody. He asked that Missouri’s legislature consider how much state-funded programs would suffer if the state implemented another tax cut. He specifically stated that he felt Kansas schools would suffer due to a tax cut the Missouri-neighbor enacted last year.
Other opponents to the business tax cuts included Amy Blouin of the Missouri Budget Project and Otto Fajen of the Missouri National Education Association.
The committee also heard a third bill. Senator John Lamping (R-St. Louis County) filed Senate Bill 31 to create a four percent flat income tax in Missouri, increase the cigarette tax and increase the state sales and use tax. Despite the two tax increases, the bill still has a $1 billion cost as noted in the fiscal note. The revenue generated from one of the two tax increases would serve as a dedicated revenue source for infrastructure improvements on Interstate 70.
Senator Lamping stated Missouri needs to rebuild its infrastructure and he believes Missouri needs a dedicated revenue source if the state issues bonds.