Mo. Senate Debates Income Tax Cuts

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JEFFERSON CITY - The Missouri Senate began work Wednesday night on a bill to cut several of the state's income tax rates to keep pace with Kansas.

Sen. Will Kraus, R-Lee's Summit, brought a bill to the floor that cuts the state's top individual income tax rate from six percent to five percent by 2018, cutting it by one-fifth of one percent each year beginning in 2013 to arrive at the new rate. The bill also cuts the state's corporate income tax rate from 6.25 percent to 5.25 percent by 2018 and allows filers to deduct half of their small business income in 2018 by phasing in a 10 percent deduction each year beginning in 2013.

Kraus chairs the Senate Ways and Means Committee, which approved tax cut legislation Monday. Kraus said tax cuts are a major priority for the state's GOP caucus this year, after Kansas cut their top individual income tax rate to 4.9 percent in May. The tax cuts in Kansas have generated worry amongst Missouri lawmakers about the state's competitiveness on its western border.

Sen. Eric Schmitt, R-St. Louis County, said the tax cuts are modeled after supply-side policies from the Reagan years, and Sen. John Lamping, R-St. Louis County, said the cuts incentivize work.  

"The less they work for government, the more they work for themselves, the more likely they are to work harder and longer for their own benefit," Lamping said.

Sen. Paul LeVota, D-Independence, said Missouri should focus on being the Show-Me State, and not the "Me-Too" state when trying to compete with Kansas. LeVota said people move to the Kansas suburbs for the quality of life and the public schools. LeVota said if the cuts create a hole in the budget it will deliver a blow to services like schools.

A fiscal note included with the bill estimates the cuts would create a budget hole of over $1 billion by 2015. However, the figures in the note were calculated from the rates proposed in the Senate Committee Substitute approved by Kraus' committee on Monday. Kraus' Wednesday version did not cut rates as much as previous ones and does not yet include a new fiscal note.

Get the bill here.