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National tax cut battle turns intense in Missouri

Tuesday - 8/27/2013, 7:09pm  ET

Gov. Jay Nixon speaks to a crowd at the Harrisonville Community Center in Harrisonville, Mo., Friday, Aug. 23, 2013. During the past six weeks, Nixon has held roughly 30 public events to rally support for his veto, a pace appearing to exceed that of last year’s re-election campaign, when he touted his enactment of previous tax cuts. (AP Photo/Orlin Wagner)

DAVID A. LIEB
Associated Press

JEFFERSON CITY, Mo. (AP) -- Millions of dollars spent broadcasting ads. Alarming fliers and phone calls targeting homes. Politicians barnstorming from one press conference to the next.

By most measures, Missouri appears in the midst of another high-stakes election -- except there is nothing on the ballot this year.

The massive campaign is meant to persuade -- or dissuade -- a few wavering Missouri lawmakers who will decide in September whether to override the governor's veto of the state's first income tax rate cut in nearly a century.

The Missouri battle is one of the most the intense yet in what has become a nationwide offensive by conservatives in state capitols to slice the income taxes that for decades have formed the financial foundation for government services ranging from public schools to prisons. They contend the tax cuts are the path to economic prosperity. Others forecast financial ruin.

About a dozen states already have cut income taxes this year, including sweeping changes to tax codes in Kansas and North Carolina and a ratcheting down of rates in Arkansas, Indiana, Ohio and Wisconsin. Conservative lawmakers who gathered at a conference this month in Chicago received a how-to pep talk meant to spread the tax-cutting movement even further in 2014.

"This is a national agenda -- there's a lot of other people that have interest in trying to create jobs in America," said Travis Brown, a St. Louis-based lobbyist and convention speaker who has traveled to 29 states this year promoting lower income taxes.

One of Brown's biggest benefactors, retired investment firm executive Rex Sinquefield, has poured about $2.4 million into an advertising campaign meant to encourage Missouri's Republican-led Legislature to override Democratic Gov. Jay Nixon' veto of the tax cut. The campaign includes the state's biggest businesses associations and conservative activist groups such as the Missouri Club for Growth, which has threatened to drop support of any lawmaker who opposes the tax cut.

The tax-cut plan even has gotten the attention of Republican Texas Gov. Rick Perry, a potential 2016 presidential candidate who seized upon Nixon's veto to target Missouri with TV and radio ads recruiting businesses to Texas. Perry is to headline an event Thursday in suburban St. Louis sponsored by a coalition pushing for a veto override.

Nixon fought back Tuesday, launching his own radio ad defending Missouri as a better place to do business than Texas and accusing Perry of "trying to get attention for himself by taking shots at Missouri."

Opponents of the tax cut have responded with mass mailings and phone calls targeting residents in 15 House districts whose Republican legislators seemed susceptible to being swayed. They have been aided by public school boards warning the tax-cut would undermine the economy, jeopardize education funding and potentially lead to crowded classrooms and lower graduation rates.

Nixon added leverage to his veto by withholding $400 million from education, building projects and other services because of concerns that the tax cut would bust a hole in the budget. The governor said he would release the money only if lawmakers sustain his veto. During the past six weeks, Nixon has held roughly 30 public events to rally support for his veto.

"We've worked very hard over the last four years to hold the line on taxes; we're one of the lowest taxation states in the country," Nixon said recently. But "this bill is not the right way to go about it."

The Missouri measure would gradually cut the corporate income tax rate nearly in half and lower the top individual tax rate from 6 percent to 5.5 percent over the next decade, but only if state revenues rise by at least $100 million annually. It also would phase in a 50 percent tax deduction for business income reported on individual tax returns and increase deductions for low-income individuals. It would trigger even more income tax cuts if Congress passes a measure making it easier for states to tax online sales.

Missouri's tax plan was prompted largely by a desire to keep pace with neighboring Kansas, where Republican Gov. Sam Brownback signed tax cut measures each of the past two years.

There's no definitive evidence yet whether the Kansas tax cut will boost or deplete state finances. Kansas tax revenues rose 2.7 percent during the fiscal year that ended in June, which included six months under the new tax cuts. Missouri revenues grew 10 percent during the same period.

Yet Kansas was presented as a shining example during a recent conference of the American Legislative Exchange Council, an association of conservative lawmakers and businesses that crafts model legislation for states.

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