Missouri Senator Will Kraus, R-Lee’s Summit, is sure a bill he has championed will help the state in the long run.
However, in the interim, David McGehee, superintendent of the Lee’s Summit R-7 School District, believes the proposed tax cuts will slash tax revenue for the state in general and indirectly hamper a public schools’ funding formula that is already under-funded.
Senate Bill 26, introduced to the Missouri Legislature by Kraus, seeks to increase sales tax rates by .5 percent while lowering personal and corporate state income tax by .75 percent over a five-year period. The bill would also create a $2,000 deduction for those making less than $20,000 adjusted gross income, add language to help with out-of-state and internet tax collection, and would create a small business deduction for pass-through business income of 50 percent over five years, among other provisions.
Kraus’s premise for the bill, which passed in the Senate with a 23-11 vote and is now before the House of Representatives’ Ways and Means Committee, is if the state does not fundamentally change its tax policy it will fall behind states like Kansas, Oklahoma and other neighbors who are reforming their tax systems. He added the fiscal impact on the state as businesses and residents choose to leave could be devastating.
“Obviously because it reduces taxes they believe that it will reduce revenue to the state,” Kraus said in response to the district’s concerns April 1 in a telephone interview with the Journal. “I will contend that I believe that we need to change our tax policy in order to bring in more revenue. I believe in broadening the (tax) base versus raises taxes or keeping taxes high on current taxpayers in Missouri.
“If you look, Oklahoma cut their taxes and brought in more revenue the very next year. What we’re doing is something similar, but doing it over a period of five years.”
McGehee was in Jefferson City April 2 to testify before the House’s Ways and Means Committee about why the district believes Senate Bill 26 will cause irreparable harm to the state’s revenue fund and in the process hurt its educational funding source.
In a copy of McGehee’s testimony before the committee supplied by the district, the R-7 superintendent made it known that the bill would “reduce general revenues in the state of Missouri anywhere from $450 to $960 million.”
“By Senator Kraus’ own admission in communication back to concerned constituents he agrees to an approximate $477 million reduction,” McGehee testified. “Regardless of the exact amount, the state of Missouri is in no financial condition to be voluntarily giving up current revenues.
“Missouri’s funding for public schools is already more than $600 million below what is required to fund its own school foundation formula, with no real plan to ever see full funding. Just in the Lee’s Summit School District, our current state aid is over $4 million less than our calculated entitlement. It is impossible to foresee a scenario in which additional cuts to education will not be necessary if SB 26 is passed.”
In 2012, the state of Kansas passed similar legislation, reducing personal income tax, cutting income taxes for most small businesses and lowering the state sales tax. Those cuts are currently under heavy scrutiny, but Kraus said Missouri needed to catch up to similar tax reform. He reiterated his bill will see cuts spread out over that five-year period, unlike Kansas, who did it all in one year.
“I believe we need to change our tax policy in order to broaden our base and bring more people to the state of Missouri,” Kraus said. “We have not kept up with the growth of other states. We’ve lost delegations. We had 16 congressional seats after World War II, were down to 8. We continually lose. We’re not growing as fast as other states. My contention is we have to change our tax policy to broaden the base to bring more Missourians and bring more jobs to Missouri and that will bring us more revenue.”
McGehee remains unconvinced the proposed tax cuts will help public schools in Missouri.
“I ask that you consider the fact that Missouri’s public schools are already severely under-funded and the setback that SB 26 would cause in our state,” McGehee testified. “Like our voters in 2011, I’m here on their behalf to say ‘enough is enough.’ Let’s leave the experimenting to our neighbors to the west, while we look for better solutions to a recovering economy in Missouri.”