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Missouri lawmakers may seek bigger package of tax cuts

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JEFFERSON CITY — An income tax cut proposed by Gov. Mike Parson could grow in size to include a reduction in taxes for businesses, the top Senate leader said Thursday.

Senate President Dave Schatz, R-Sullivan, told the Post-Dispatch that a variety of tax-cutting options emerged during a meeting Wednesday among House and Senate leaders, causing them to postpone the start of a special session for at least a week.

“There are multiple people who have different ideas on what direction this goes,” Schatz said. “Instead of just forging in and finding ourselves at an impasse, we need to explore all the ideas.”

The legislative delay comes after Parson spent weeks traversing the state to outline his plan to reduce state income taxes from their current 5.3% to 4.8%, citing a historic surplus of funding in state coffers.

But, even after Parson’s lobbying effort, his fellow Republicans say they need more time to consider other options.

“We don’t want to set ourselves in motion for failure,” Schatz said.

Schatz said an expansion of Parson’s $700 million proposal is being considered.

“I’m not saying we’re going to address corporate income tax, but it became part of the conversation,” Schatz said. “We’re going to circle back with ideas next week and see where people’s thoughts are.”

The state general revenue fund through July 31 had a surplus of more than $4.2 billion. Tax revenues have increased nearly 24% this fiscal year.

Along with a significant uptick in income tax revenue, Missouri’s budget has been fueled by more than $9.8 billion in federal pandemic aid since April 2020, according to figures released Wednesday by Auditor Nicole Galloway.

Some of that cash has been used for day-to-day expenditures, including more than $524 million in salaries and fringe benefits for front-line state workers over the same period of time, according to data provided by the governor’s budget and planning office.

Without the emergency aid, those salary costs will again have to be paid out of the state’s general tax revenues.

The effect of the federal money on the state budget is a concern for some members of the Legislature, Schatz said.

“We are in the position we’re in because of federal money,” Schatz said. “We can’t bank our budget on an influx of federal cash. We have to look at what this is going to do for us down the road.”

Even with the federal dollars, Missouri has struggled to provide necessary services because of a shortfall in workers. Lengthy waiting times for Medicaid applicants, for example, have drawn the scrutiny of federal health officials.

In addition, the Missouri Department of Mental Health has a waiting list for more than 600 developmentally disabled residents in need of intensive services. And, at the Missouri Veterans Commission, hundreds of nursing home beds for former military veterans sit empty because of staffing problems.

Parson has argued that lawmakers can cut taxes even with the loss of the federal relief money and not hurt the state’s bottom line. During a stop in Columbia last week, he called claims that the cuts could affect state services “propaganda” and “political spin.”

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