Senate endorses massive tax overhaul

By Nick Thompson

JEFFERSON CITY — The Missouri Senate gave preliminary approval Wednesday to a series of income-tax cuts and a sales-tax increase that Republican leaders have been calling for to keep the state economically competitive.

The bill, sponsored by Sen. Will Kraus, R-Lee’s Summit, would cut state income-tax rates for individuals, small businesses and corporations and raise the state sales tax by 0.5 percent. The bill would start phasing in the rate changes in 2014 and the final rates would take effect in 2018.

Kraus prefiled his tax cut legislation in December and has modified the bill several times since then. Kraus said some type of tax cut would be necessary after Kansas slashed its individual income-tax rates and tax rates for small businesses in May 2012.

“I’m not trying to do what Kansas is doing,” Kraus said. “I’m trying to stop the bleeding. I’m trying to stop the businesses from fleeing Missouri into Kansas.”

The Senate endorsed the plan despite the absence of an official fiscal note with an estimate of the costs of each provision. Kraus estimates the legislative package would cost the state treasury $450 million each year.

The plan also moved on despite Democratic opposition. Some Democrats said the General Assembly should tread carefully in crafting new tax policy because the state already struggles to fund some of its obligations through its current revenue stream.

“I’m not saying that we should do nothing,” said Sen. Jason Holsman, D-Kansas City. “I’m saying that what we should do should be very calculated, very vetted and we should understand the potential consequences or the unintended consequences of the actions we’re gonna take here today.”

Some Democrats also have voiced concern that the sales-tax increase is regressive and will hurt the poor, as the poor pay a larger percentage of their income in sales taxes.

The bill needs another affirmative vote in the Senate before it can move to the House.