A Missouri public policy group says changes in tax laws are responsible for the state’s current budget problems.
The Missouri Budget Project claims tax breaks passed last year, but not accounted for in the current year’s revenue estimates are part of the problem. The group’s Traci Gleason says another issue is the way corporate taxes are calculated.
“We have seen that between fiscal year 2015 and 2016 that ended in June, that there was a 36 percent decline in those collections” said Gleason. “And that trend is continuing from what we’ve seen in the first month of 2017.”
Laws passed in 2013 and 2015 make changes which allow multi-state corporations to adjust their distribution of profits and reduce their tax liability in Missouri. The Missouri Budget Project pegs the state loss resulting from the corporate tax adjustment at $155 million.
The group also claims lawmakers failed to account for tax cuts they passed in 2016 that are being felt in the current fiscal year.
Gleason said “The budget was based on those taxes being in effect. But then they cut those taxes. So that had an impact on meeting the current year’s budget.”
One of the tax laws allows agriculture producers to claim losses from natural disasters, and to do so retroactively. The other was the elimination of sales taxes for instructional classes.
Both measures were vetoed by then Democratic Governor Jay Nixon, and then overridden by the Republican dominated legislature and put into law.
SB 1025 dealt with instructional classes. It was sponsored by GOP Senator Will Kraus of Lee’s Summit. The Office of Administration had estimated that it would cut a little under $8 million from the state budget. Nixon said the economic impact would be about $5.7 million every year when he linked it to $57 million in restrictions he announced in September.
SB 641 from Republican Senator Dave Schatz of Sullivan created an income tax deduction for agricultural producers who suffer a loss due to disaster or emergency. Those deductions are now retroactively available back to events occurring in 2014.
Nixon claimed the measure would cost the state $50 million, while Schatz contended the loss in revenue only amount to $12 million.
Nixon made a total of $201 million in spending restrictions between July and late December. Republican Eric Greitens slashed another $146.4 million earlier this month. In his State of the State address, Greitens said $700 million in restrictions would have to be made over the next 18 months to shore up the state’s bottom line.
The Missouri Budget Project predicts between $200 and $250 million will need to be sliced from spending between now and the end of June, unless tax collections grow far above the current projected rate of roughly 3.4 percent over last year.
Gleason said the continuing restrictions could have a lasting impact on Missouri’s economy. Roughly $90 million in the last round was taken from education.
“Without a skilled and educated workforce and a quality education system, pre-K to college, we’re not going to able to compete for the types of jobs that Missourians need to provide for their families” said Gleason.