A tax cutting bill that would return large increases in state tax revenues to taxpayers began its journey Thursday morning in the Missouri Senate.
Senator Eric Schmitt (R-St. Louis County), who handled the Associated Industries of Missouri (AIM) business income deduction bills dating back to 2011, presented SB 4 to the Senate Ways and Means Committee. The bill would modify the historic tax cut contained in last year’s SB 509 by doubling the amount of the tax cut for individual taxpayers and business taxpayers. The rate cuts would double for individual taxpayers and the amount of the business income deduction would double for business taxpayers. Schmitt’s bill would preserve the same “triggers” required for the tax cuts that require state revenue growth of at least $150 million over the highest amount of general revenue over the previous three fiscal years – an extremely high watermark.
Ray McCarty, president of Associated Industries of Missouri, was the first witness to testify in support of the bill. McCarty pointed out to the Committee that the business income deduction was the result of conversations he had with an AIM member, Bennett Packaging, who pointed out the need to provide tax relief for S corporations. “The AIM Tax Committee developed the idea of the business income deduction – the first in the nation – based on this suggestion from an AIM member,” said McCarty. Before Missouri could enact the law, several other states had enacted the business income deduction. Finally, Missouri adopted the idea in the historic tax cut bill that was vetoed by Governor Jay Nixon but placed in law by the General Assembly anyway last year in SB 509, sponsored by Senator Will Kraus (R-Lees Summit).
McCarty pointed out to the Committee that SB 4 contains the original amount of the business income deduction that we suggested in 2011 – 50%. The reduction for individual taxpayers would lower their tax rate by a full 1% when fully phased in. Currently, the tax rate will only be reduced by one-half percent for individual taxpayers.
The bill was supported by AIM and the Taxpayers Research Institute of Missouri, Missouri Retailers Association, the Missouri Grocers Association, and others. Opposing the bill were the same groups that opposed the tax cuts in previous years: Civic Council of Greater Kansas City, Missouri Budget Project, and the NEA.
Read more about why Sen. Schmitt says the tax cut bill is necessary in this excellent article from the Missouri Times.