Governor Nixon Vetoes Tax Cut Bill

In a strongly worded veto message Governor Jay Nixon this week vetoed HB 253, a broad based tax cut measure that was the cornerstone of the GOP legislative agenda this year. In his veto message, Governor Nixon called the legislation an “ill-conceived, fiscally irresponsible experiment ” that would inject “far -reaching uncertainty into our economy.” The MCC took no position on the legislation.

The main provision of HB 253 was a 50 percent tax cut, phased in over five years for businesses that “pass-through” their income to the owner’s personal return. The bill would also lower the top personal income tax rate by one-half of a percentage point to 5.5 percent. Also the corporate tax rate would drop by 3 percentage points to 3.25 percent. These cuts would be phased in over 10 years. A trigger mechanism in the bill prevents the tax cuts from going into effect for a certain year if state revenues haven’t increased by a specific amount in the previous year.

Supporters of the measure saw the bill as a way to help create jobs and put more money back into the hands of working taxpayers in Missouri. Many felt the bill would make Missouri more competitive with the neighboring states of Kansas and Oklahoma, which recently reduced their income taxes.

Opponents claimed that the bill could reduce state revenue by more than $700 million when fully implemented. Such cuts would result in Missouri reducing services, especially for public education.

Governor Nixon’s veto message also highlighted an apparent mistake in the legislation that would have removed a sales tax exemption for prescription drugs, resulting in an approximate $200 million tax increase for Missourians who need prescription medications.

The governor’s actions sets up a potential override in the veto session this fall. The Republicans currently have the two-thirds majority in both chambers needed to override a veto without any help from the Democrats.

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