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Missouri tax cut plan continues to evolve under Capitol dome

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Missouri State Capitol in Jefferson City

The Missouri State Capitol building in Jefferson City as seen on Thursday, Jan. 6, 2022. Photo by David Carson, dcarson@post-dispatch.com

JEFFERSON CITY — A Senate panel scrapped a plan Monday to give Missourians tax rebate checks but signed off on an income tax cut being pushed by Gov. Mike Parson.

The Senate Appropriations Committee’s action was the latest step taken by lawmakers to comply with a call by Parson to reduce state income tax rates from 5.3% to 4.8%.

The committee nixed a proposal to offer $325 rebate checks on top of the tax cut, saying Parson was unlikely to approve of that provision.

The panel also dropped efforts to reduce corporate income taxes, signaling that the Republicans who control the Legislature may be inching closer to an agreement.

“Obviously, we are continuing to have discussions. I think we’re in a good place,” said Sen. Sandy Crawford, R-Buffalo.

Initial votes on the plan in the full Senate could come as early as Tuesday.

Parson called lawmakers back to the Capitol on Sept. 6, but leaders in the House and Senate delayed the start of the special session until last week in hopes of working out an agreement.

Parson said the state can afford to lower taxes because 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 an increase in income tax revenue, Missouri’s budget has been fueled by more than $9.8 billion in federal pandemic aid since April 2020.

Under a plan crafted by Sen. Lincoln Hough, R-Springfield, the tax rate would eventually decline to 4.5% over time if certain revenue growth triggers are met.

He had also wanted to issue rebate checks of $325 to individuals and $650 to married couples, but that provision was jettisoned after Parson said he didn’t support the idea. Parson earlier vetoed a proposal that included rebate checks worth up to $500.

Sen. Andrew Koenig, R-Manchester, removed a provision in his legislation that would have reduced the corporate tax.

The disagreements among lawmakers had some advocates urging lawmakers to tread lightly.

Jay Hardenbrook, a liaison for the American Association of Retired Persons, said many seniors won’t see significant tax relief because retirement income is not taxed in Missouri.

“Be cautious. Move carefully,” Hardenbrook told members of the budget-writing committee.

Otto Fajen of the Missouri National Education Association expressed concern that cutting taxes could limit the Legislature’s ability to adequately finance schools.

“Let’s proceed very cautiously,” Fajen said. “If you’re going to make a mistake of this magnitude, don’t be in a hurry to do it.”

Meanwhile, in the House Agriculture Policy Committee, lawmakers approved a package of agriculture incentives ranging from tax credits for ethanol and biodiesel to loans designed to boost specialty crops in the state.

Parson, a cattle farmer, vetoed a separate bill containing incentives for farmers over the summer, criticizing it for only extending incentives for two years. The legislation in the House would authorize incentives for six years, in line with the governor’s wishes.

Jeremy Cady, state director for Americans for Prosperity, spoke against the tax incentive package.

“We’re expending a lot of funds for these but ... we don’t have anything to show for it on the back end,” Cady said. “We are selecting a very select few individuals to benefit from these at the expense of all Missourians.

“We don’t believe government should be in the business of picking winners and losers,” he said.

But Republicans on the committee shot back, portraying incentives in the bill as a boon to the entire state.

Rep. Greg Sharpe, R-Ewing, said he would “take a little exception” to some of what Cady said. He cited the ethanol plant in Macon, which he said had financial backing from the state of Missouri in 2000 when it opened.

“Since then, there’s been about 50 employees or more,” Sharpe said, saying that the plant probably increased the price of corn 10 to 15 cents per bushel.

“It doesn’t just benefit the people that participate directly but it also drives the market,” Sharpe said, adding many incentives were designed to “add value” to agricultural products. “The state has benefited a great deal.”

Cady suggested this was “market manipulation” and said the state would see a “great benefit” by getting rid of tax credits and slashed taxes across the board.

“What this is is economic development,” Sharpe said.

Rep. Rick Francis, R-Perryville, touted the benefits of a meat processing facility tax credit included in the legislation.

He said the credit helped facilities expand operations at a time when there were major backlogs for processing livestock.

“It was a benefit to the state of Missouri to provide these tax credits,” Francis said. “In addition to that, they were expanding their workforce.”

Originally posted at 3:55 p.m. Monday, Sept. 19.

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