JEFFERSON CITY • After seven years, a push by retired St. Louis investor Rex Sinquefield to revamp the state’s tax code made headway Tuesday night in the Missouri Senate.
The Senate passed a bill that would gradually increase the state sales tax by one-half percent over five years while reducing individual and corporate income tax rates by 0.75 percent.
The first $25,000 of corporate income would be exempted from taxation. Also, small businesses that report company income on owners’ personal tax returns would get a phased-in, 50 percent deduction.
Supporters said the changes would spur businesses to grow in Missouri instead of moving to nearby states such as Oklahoma and Kansas, which have cut their income taxes.
“Missouri is lagging behind,” said the bill’s sponsor, Sen. Will Kraus, R-Kansas City.
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Opponents said the changes would slash about $670 million from the state budget, making it harder for Missouri to fund vital services such as education and roads.
Meanwhile, the higher sales tax would hit low-income people hardest, the critics said.
“It shifts the burden from those who can afford it to those who cannot,” said Sen. Jason Holsman, D-Kansas City.
The bill passed on a mostly party-line vote of 23-11, with all Republicans except one supporting it and all Democrats opposing it. It now moves to the House.
Travis Brown, Sinquefield’s chief lobbyist, listened to the debate perched on a table in the Senate’s side gallery. Brown called the bill — which would eventually drop Missouri’s top personal income tax rate to 5.25 percent and the corporate tax rate to 5.5 percent — “a good start.”
Other states keep “raising the ante” by pursuing additional cuts, said Brown, noting that Oklahoma’s Senate approved this week a 4.75 percent rate and Kansas is discussing further reductions to its 4.9 percent top rate.
Sinquefield, who returned to his native St. Louis in 2006 after a successful career in the investment business in California, has argued that income taxes discourage productivity. He founded a free-market think tank and has given millions of dollars to public officials’ campaigns.
He originally tried to get legislators to repeal Missouri’s income tax, which accounts for 71 percent of the state general revenue fund. The revenue would have been replaced by levying a higher sales tax on a broader base of goods and services. The complex plan didn’t fly.
Sen. Ed Emery, R-Lamar, sponsored the broader tax shift when he was a House member. Emery said Tuesday that although he would “like to see us move faster,” the Senate-passed bill “moves us in the direction of increased prosperity.”
The bill drew criticism from Gov. Jay Nixon, a Democrat. He said Missouri’s tax burden ranked 44th nationally as a percentage of personal income. The Senate changes, Nixon said, favor corporations and would hurt working families and seniors on fixed incomes.
If the House approves the bill, it could set up a test. The GOP has enough seats in both chambers to override a gubernatorial veto.
The bill is SB26.
Virginia Young is the Jefferson City bureau chief of the Post-Dispatch. Follow her on twitter at @virginiayoung.
