Missouri Legislators Override Veto, Approve Income Tax Cuts

Published May 7, 2014

Missouri legislators in May overrode the veto of Gov. Jay Nixon (D) to enact the state’s first income tax cut in nearly 100 years.

The state’s top tax rate on personal income will decline from 6 percent to 5.5 percent in stages beginning in 2017. The top tax rate starts at taxable income of just $9,000. Missouri also will become the third state to offer a special business-income deduction on personal tax returns.

However, the tax cuts come with a caveat: They happen only if Missouri’s tax revenues grow at least $150 million above the highest point over the last three years.

State officials estimate income taxes would be reduced for approximately 2.5 million households. Hundreds of thousands of people involved in business partnerships, limited liability corporations or individual business ventures would benefit from the 25 percent deduction for business income reported on personal tax returns.

The votes for override were 23-8 in the Senate and 109-46 in the House.

‘Important First Step’

“Senate Bill 509’s passage is a victory for taxpayers that stands in stark contrast to tax handouts, like Boeing’s, that have bedeviled reformers’ attempts to take the cronyism out of the state’s economic development efforts,” said Patrick Ishmael, policy analyst at the Show-Me Institute in St. Louis, Missouri. “This first tax cut is a small but important first step to ensuring every Missourian, not just a select few with special connections in Jefferson City, is empowered to make this state better.”

“As disappointing as it was to see a governor veto tax relief for all Missourians, the legislature should be commended for standing up for taxpayers,” said John Nothdurft, government relations director for The Heartland Institute. “While the reforms were not as significant as North Carolina’s, this is also yet another signal to other states that they will need to look at tax reform to compete for both businesses and for labor.”

North Carolina legislators in 2013 approved several major reforms to lower personal income tax rates for all taxpayers, cut corporate income taxes, and repeal the estate tax.

Governor: Schools Need Money

“Missouri families and businesses know that public education is the best economic development tool there is, and that is why I vetoed Senate Bill 509,” Nixon said in a statement after legislators in the Republican-controlled legislature overrode his veto.

“While scaled back from last year’s billion-dollar House Bill 253, Senate Bill 509 fails to prioritize or adequately protect public education at a time when quality public schools are more important than ever to our ability to create jobs in the global economy. And while its authors may have delayed its impact, Senate Bill 509 remains a very real threat to the principles of fiscal discipline that have helped us maintain our spotless AAA rating for decades.”

Legislators last year failed to override Nixon’s veto of a bigger tax-cut bill.