A series of tax cuts, vetoed in June by Gov. Jay Nixon, may resurface next month as the Republican-controlled Missouri legislature attempts an override.
House Bill 253, originally passed through the Statehouse in May, would lower the maximum income tax rate for individuals and corporations and revise the list of items exempt from sales and use tax, removing, among other previously exempt items, prescription drugs and textbooks.
Nixon, a Democrat, said in his veto letter that Missouri’s stable economic climate does not need drastic changes to the tax code in order to attract more business.
“House Bill 253 is an ill-conceived, fiscally irresponsible experiment that would inject far-reaching uncertainty into our economy, undermine our state’s fiscal health and jeopardize basic funding for education and vital public services,” Nixon stated in his letter. “At the same time, the legislation would increase taxes on prescription drugs and college textbooks, provide special treatment for some businesses while discriminating against others and make our tax code less fair.”
Projected cuts to higher education funding sparked more opposition, namely by UM System President Tim Wolfe. UM System institutions are funded in large part by taxpayer dollars. If that funding runs dry, Wolfe said at a June meeting of the Board of Curators, there may not be another revenue stream available.
“I’m not opposed to tax cuts as long as we’re completing the equation by finding revenue elsewhere or finding where those expense cuts can be made,” Wolfe said at the meeting. “But that’s not what’s happening with House Bill 253.”
Missouri Students Association President Nick Droege was also critical of the bill and legislators’ attempts to muscle it through.
“It’s not the specifics of the bill; it’s the overarching issue of continued cuts to higher education,” Droege said. “It’s just been an overall fight for legislators to view higher education as an investment. What continues to happen is that we’re balancing the budget on the backs of higher education institutions.”
Droege believes one of HB253’s components is a silver lining for MSA to use to engage students.
“It puts sales tax on textbooks, which is a great way for us to market to students the issue and why we raise the problems with the bill,” Droege said. “Hopefully we’ll have some information on marketing tactics to engage students in the coming month.”
The MSA’s legislative advocacy team will raise awareness about HB253 a week before the override vote in a speaking engagement called “Kill the Bill?”
The override might not be successful, anyway. HB253 passed through the House 103-51. A veto override requires 109 votes, per the state constitution.
Nixon has insisted in his campaign to maintain the veto that the potential opportunity cost is worth voters’ concern.
“Using the legislature's own estimate for this bill's cost, the University of Missouri System could see a reduction to our core funding of more than $31 million a year,” Nixon said last week in a speech at MU.
The governor also cited reports by Standard & Poor’s, Fitch and Moody’s investment services, which all said that HB253’s passage could lead to a statewide downgrade from Missouri’s AAA credit rating.
To the author of HB253, Rep. T.J. Berry, R-Kearney, it is all a matter of competition. Kansas enacted similar legislation earlier this year.
“House Bill 253 was a response to the environment that Missouri is facing with the states that surround her,” Berry said. “We have to play defense to protect what we have.”
Berry said Kansas’ policy gives businesses on Missouri’s western border reason to move offices across state lines. Being able to turn the tables on neighbors, he said, is a tool of economic attraction.
“If (Kansas is) wrong, great. Their ignorance and their mistakes will quickly become evident,” Kearney said. “And then businesses won’t move and businesses won’t do their thing, and Missouri won’t have spent very much capital to have a tool. But right now we don’t have a tool — we don’t have anything.”
Berry said he regrets not adding several of the contested items — especially prescription drugs — to his sales tax exemption list, but they could be tacked in January if the Statehouse overrides the veto.
“I believe in Missouri,” Berry said. “But people looking outside-in, especially medium and large-sized businesses, are looking at the return of investment. And I don’t blame those businesspeople.”