JEFFERSON CITY, Mo. — Missouri’s Republican Senate leaders expressed reservations Thursday about a massive tax overhaul given initial approval by the chamber, raising doubts about the ultimate fate of the measure.
Senate President Pro Tem Ron Richard and some other leading senators all said they were concerned about the potential financial impact to the state from the legislation that would cut individual and corporate income tax rates, curb some income tax deductions and raise the states’ motor fuel taxes, among other things.
Senators gave initial approval by voice vote Wednesday to the 428-page bill after less than 30 minutes of debate. The legislation next must pass through a financial review committee before returning to the Senate for a roll-call vote that would sent it to the House.
Richard, who was presiding over the chamber during Wednesday’s vote, said he was among those voting “no” as it quickly gained first-round approval.
“I about fell off the dais when I saw it,” said Richard, a Republican from Joplin.
He noted that the state already is implementing two tax cuts — a gradual income tax reduction approved by the Republican-led Legislature in 2014 and a federal income tax cut signed by President Donald Trump that has implications for state revenues. The effects of both are still being determined, Richard said. He added that the new tax plan endorsed by the Senate would raise taxes on some people in order to offset other tax cuts.
“That gives me pause,” Richard said.
The legislation by Sen. Bill Eigel would reduce the top individual income tax rate from its current 5.9 percent to 5.25 percent in 2019. Additional tax cuts automatically would kick in during future years if state revenues grow by more than $150 million annually or if the federal government allows states to require out-of-state businesses with no physical presence in a state to pay state sales taxes on products sold in that state.
The legislation would reduce Missouri’s corporate income tax rate from 6.25 percent to 5.25 percent starting next year.
Other provisions would eliminate the state income tax deduction for corporate taxes paid to the federal government, reverse a recently enacted tax apportionment option that has benefited some businesses and limit the state tax deduction that individuals can take for taxes paid to the federal government.
The legislation also would gradually increase the state’s motor fuel taxes from the current 17 cents a gallon to 23 cents a gallon by July 2021 and would allow additional increases to keep pace with inflation. Fuel taxes could automatically rise further if the federal government expands states’ sales tax options.
All told, the legislation is projected to reduce state general revenues by $8 million in its first year and about $50 million in its second year while raising fuel tax revenues for state and local roads by $35 million in its first year and $84 million in its second year, according to an analysis distributed by Eigel’s office. The Republican senator from Weldon Spring has described the bill as approximately revenue neutral to the state.
“We’re able to cut taxes, we’re able to fund infrastructure, and these are things that I think the Republican Party stands for,” he said Thursday.
Senate Majority Floor Leader Mike Kehoe, a Republican from Jefferson City, said he voted “yes” on the bill’s initial approval but is concerned about its potential impact on the state.
“I want to see what comes out of fiscal oversight,” he said, referring to a committee that will evaluate the bill.
Senate Appropriations Committee Chairman Dan Brown also said he was somewhat concerned about the proposed tax changes.