JEFFERSON CITY • Legislation that would have cut income taxes in Missouri for the first time in nearly a century is dead, but many supporters say they aren’t giving up.
A day after the Missouri House fell 15 votes shy of overriding Gov. Jay Nixon’s veto, legislative leaders vowed that cutting taxes will be the top priority for the Legislature when it returns to the Capitol in January.
And representatives of an effort largely financed by retired investor Rex Sinquefield of St. Louis said they will continue to forge ahead with promoting income tax cut proposals.
“There’s been an overwhelming response and groundswell, and we have the public’s focus,” said Aaron Willard, treasurer for the Grow Missouri coalition. “Going forward, we have a very good idea of something that could be put in another proposal.”
But just as he was this year, Nixon, a Democrat, could prove to be the biggest hurdle for Republicans moving ahead.
Armed with supermajorities in the House and Senate, GOP legislative leaders have called on Nixon to work with lawmakers to craft a bill he can agree with, but the second-term governor typically has stayed on the sidelines during the legislative session and let his veto pen do the talking.
“I’ve not closed my mind to sitting down and having a thoughtful discussion on this, but we’re not going to do tax policy on the back of a cocktail napkin,” Nixon told reporters in his Capitol office this week. “This is serious business.”
Sen. Will Kraus, R-Lee’s Summit, who worked on the tax cut legislation this year, said he’s working on proposals and he wants input from across the aisle.
“We’re going to have to move forward with something,” he said. “I think it’s going to be sooner rather than later.”
Under the proposal this year, Missouri would have modestly scaled back individual income taxes while cutting the corporate income tax rate nearly in half if certain revenue triggers were met. The measure also would have led to further cuts if Congress passed the Federal Marketplace Fairness Act and created an opportunity for a 50 percent tax cut, phased in over five years, for businesses that “pass through” their income to the owner’s personal return.
The legislation was the result of months of hearings and revisions at the Capitol, and some of Nixon’s key criticisms were over provisions that appeared to be drafting errors.
On a media blitz Wednesday, House Speaker Tim Jones detailed his plan to strip out the portions that Nixon found objectionable and push the legislation as the first bill of the coming session.
“We have to provide tax relief for Missourians,” he said.
But Nixon said aside from what he perceived as language that could have led to increased costs in prescription drugs and college textbooks, he thinks the bill had two “critical flaws.”
“It would cost too much and the benefits it offered were dubious,” he said.
For a tax cut to get his seal of approval, it would need several components, he said.
“No. 1, they have to be directly tied to job creation — not in dubious theory, but in a clear way that we can create and add jobs … No. 2, they have to be affordable,” he said. “We can’t have some risky experiment that hopes that if a whole bunch of money disappears that magic will happen, because our kids don’t get educated on magic.”
Nixon said he also wants tax credit reform, which has been doomed at the Capitol for several sessions, to be included in the proposal.
Missouri’s clash over tax cuts is just the latest in an effort driven by conservatives across the country to chip away at state income taxes. The tax cut proposal here garnered national interest and prompted a statement of support from Americans for Tax Reform president Grover Norquist. Texas Gov. Rick Perry, a Republican who has touted his own tax policies to businesses in states across the country, made a stop in Missouri to speak in favor of the Legislature’s override attempt.
Proponents of such measures say tax cuts spur job creation and economic activity, while opponents often characterize the shifts as risky and potentially harmful to funding for state programs, including education.
A recent report from the National Conference of State Legislatures highlighted income tax cuts adopted this year in Iowa, Maine, Ohio, North Dakota and Wisconsin, which have come in addition to more substantial tax code reforms in North Carolina and Kansas.
“There has been a movement. A lot of states throughout the country have are looking at cutting their income tax or reforming taxes in some way,” Willard said.
In particular, Kansas, where leaders have approved multiple tax cut measures in recent years, has served as a motivation for Missouri lawmakers hoping to respond to the ongoing “border war” over businesses.
“Standing still is moving Missouri further and further behind,” Kraus said. “If we do nothing, jobs will move.”
Nixon said the state’s focus should be on education as a tool for promoting job creation.
“We already have a very competitive tax climate — some of the lowest taxes in the nation,” he said.
Education served as a critical issue for Nixon’s campaign against the override. He made dozens of appearances — many at schools — to speak out against the bill. Several school boards across the state adopted resolutions against the override and pressured their local lawmakers after Nixon withheld millions in funding for education, pending the outcome of the override attempt and its impact on state revenues.
Jones has been especially critical of “edu-crats” whom he blames for the demise of this year’s bill.
Sinquefield, a frequent contributor to political causes, wasn’t available for comment Thursday. He spent more than $2 million on a media blitz that included television and radio ads, as well as rallies — including the Perry appearance.
Willard described the effort as a success — despite Wednesday’s loss.
“We were very proud of the overall effort,” Willard said. “I think there is some benefit to having gone through the way it did. Now we know if people are going to be serious about tax reform.”
Willard said he expects Sinquefield’s involvement in the effort to continue, though he noted that this year’s bill “was not even a Rex Sinquefield bill.”
He said it’s not clear what form the campaign will take as the effort moves forward, but it will heavily focus on grass-roots efforts to inform the public about the tax cut debate.
Meanwhile, lawmakers say they soon will start on the next version.
“We want Missouri to be a job-friendly state. We want more jobs,” Kraus said. “I’m going to work with anyone who wants to sit down and talk about it.”