The Missouri House took a considerable step toward tax reform and economic rebound this week, perfecting and passing HCS SS SCS SB 26, 11 & 31. This bill reduces income taxes at all levels, not just for the big corporations.
Missouri must have a friendly business climate in order to compete in the global economy, and attract businesses to our state. But this measure goes further and rewards the hard work of individuals and the risks of entrepreneurs. Through SB 26, the House aims to make Missouri not only business-friendly, but family-friendly, entrepreneur-friendly, and job-creator-friendly.
Over a five-year period, this legislation will reduce the individual income tax from the current 6% rate to 5.33% and Missourians with incomes under $20,000 will receive a $2000 income tax deduction. For businesses, the current corporate income tax rate of 6.25% will go down to 5.5% and the businesses first $25,000 of corporate income won’t be taxed at all. The most important cut, however, is the 50% reduction on the business “pass through” income tax. These “pass through” corporations – the sole proprietorships, partnerships, and S-corporations – generate more than half of the business income in the United States. Small businesses are truly what keep this country – and this state – moving.
Missouri will make up for the revenue difference by phasing in a 0.6% sales and use tax over the next five years. Opponents of tax reform say this will devastate the poorest Missourians, but this is false. Necessities like food, gasoline, and mortgages will not see any sales tax increase. Meanwhile, individuals who have the means to buy new cars every year will make their contribution through an increased sales tax.
To ensure Missouri does not have a revenue deficit crisis, the bill has a built-in stopping device. Each phase of the individual and corporate income tax cut is dependent on a revenue increase of at least $100 million from the previous fiscal year. Simply put, if the tax cut doesn’t work as expected, we won’t continue it.
Overhauling our tax structure will undoubtedly mean some changes, but these will be rewarding changes. A cap on revenue will force future legislators to be true stewards of Missourians’ tax dollars, instead of jumping to create a new government program every time a problem arises. New programs often start with good intentions, but more often than not, half the money allocated to programs for the less-fortunate goes to administrative costs. In other situations the programs produce little benefit with less than promised results.
The legislature should not be in the business of creating government jobs. Bureaucratic jobs often outlive their use and under employ their workers. In the past few months we have seen federal employees – educated, hardworking individuals – lose their jobs due to sequestration. The only way to stop this trend is to encourage businesses to open up in every town and city. We have to remove the barriers for smart, dedicated individuals to set up their own shops and furthermore, we need to encourage families to reinvest in the local economy by allowing them to keep more of their money.
That is what SB 26 does for our state. It enables entrepreneurs to fulfill their dreams of starting a local business. It attracts corporations to relocate to Missouri, bringing with them hundreds of positions for good, family-sustaining jobs. And it gives Missourians a break, allowing them to keep more money and spend it as they like, on goods and services in their local economies, and giving their own neighbors a helping hand.
SB 26 now returns to the Senate for final legislative approval before heading to the Governor’s desk. This measure is something both the House and Senate believe in. No matter the Governor’s action, your Republican-led House will continue to pass similar legislation to help our state rebound, and put more of your hard earned dollar back in your pocket.