Pass-Through Welfare; Our View; Mr. Nixon Must Veto Corporate Tax- Cut Bill

By Board, the | St Louis Post-Dispatch (MO), May 19, 2013 | Go to article overview

Pass-Through Welfare; Our View; Mr. Nixon Must Veto Corporate Tax- Cut Bill


Board, the, St Louis Post-Dispatch (MO)


Now that the Missouri Legislature mercifully has adjourned for the year, Gov. Jay Nixon should waste no time in vetoing House Bill 253, the final iteration of the unfair, unwise and unproductive session-long effort to cut state income tax rates.

In some ways, HB 253 is less odious than earlier versions of the tax-cut proposal. It would not, for example, replace revenue lost to the income-tax cut with revenue raised by higher sales taxes. That means poor and working-class Missourians wouldn't be dinged again to pay for tax breaks given to wealthier Missourians and corporations.

On the other hand, after 10 years, the annual price tag for the bill would be anywhere from $700 million to $817 million. That's money that would not be spent on schools, higher education, corrections or any of the other niceties that smart states invest in.

The bill's supporters insist that annual safeguards or "triggers" included in the legislation would keep the cuts from kicking in unless state revenue has risen $100 million. State revenues will grow, they say, just not as fast as they would if HB 253 hadn't been passed.

This growth is predicated on a boom in business activity that supporters expect once people figure out how tax-friendly Missouri has become. There is little objective data to support that conclusion and quite a bit to suggest that tax rates are not a critical factor in business location or expansion decisions.

HB 253 would reduce the top personal income tax rate from 6 percent to 5.5 percent. Everyone in Missouri who earns at least $9,000 a year pays the 6 percent top rate. The graduated income tax was adopted in 1931; at the time, very few people earned $9,000 a year equal to $137,682 today. Missouri essentially has a flat tax rate, one big reason for its poor state services and benighted economic condition.

The basic corporate income tax rate for so-called "C- corporations" generally public companies would be cut from 6.25 percent to 3.25 percent. The cuts would be phased in over 10 years as long as revenue growth "triggers" were pulled.

The big winners under HB 253 would be so-called "pass-through" corporations organized under subchapter S of the Internal Revenue Service code or as partnerships, limited-liability firms (in some instances) or sole proprietorships. …

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