Tax cuts and tax credits were the center of attention at hearings conducted by two Missouri House committees Tuesday night.
First, the House Ways and Means Committee approved this year’s attempt to cut taxes. House Bill 1253, or the Broad-Based Tax Relief Act of 2014, would tie the state’s income tax rate for business owners to economic growth, dropping the tax rate by 10 percent each year if certain conditions are met, with the ultimate goal of cutting taxes by 50 percent.
State Rep. T.J. Berry, R-Kearny, the bill's sponsor, also sponsored last year’s failed tax cut proposal. He was not present for the vote but is on record as saying his bill addresses concerns voiced by Gov. Jay Nixon, who vetoed last year’s bill and led a successful effort to block a legislative override vote last fall. This year, Nixon has decried any renewed efforts to cut income tax rates, calling them a threat to public education.
The Broad-Based Tax Relief Act was approved on a 9-to-6 vote that fell along party lines. Prior to the vote, Democrats on the committee offered amendments, including one to require voter approval for the tax cut to become law. None made it onto the bill. State Rep. Rory Ellinger, D-University City, suggested that cutting taxes would be unwise, especially since Democrats and Republicans don’t even agree on how large the state budget should be.
“In fact, we have two budgets floating around, the budget the governor has proposed, which is millions more, and then (the Republican-controlled) Budget Committee, saying in effect we’re millions short,” Ellinger said. “What’s the end result if you have a big surplus or the extra money the governor has promised will go to education?”
House Bill 1253 now goes to the House Rules Committee where it is also expected to pass, and then it would go before the full House for its first round of debates.
Meanwhile, a few doors down, the House Economic Development Committee heard testimony on this year’s attempt to pass a wide-ranging tax credit package. House Bill 1498 contains proposals on numerous tax credit programs, including historic preservation, low-income housing, land assemblage and data storage centers. Bill Gamble, a lobbyist representing Kansas City, told the committee that creating incentives to lure data centers would benefit the entire state as well.
“We have the territory, we have the caves, we have the low energy costs, (but) we don’t have the incentives to compete with other states,” Gamble said. “We have lost business to other states because we can’t compete, we do not have the incentives.”
Gamble also urged the committee to create the Angel Investment Incentive Act, in which wealthy individuals, or “angels,” would provide seed money for high tech start-up companies.
The bill would also shrink the cap on historic preservation incentives from $140 million a year down to $90 million for projects costing over $275,000. Incentives to build housing for the poor would be capped at $130 million on July 1, 2015. It would then shrink each year down to $110 million by July 1, 2019.
House bill 1498 would also revive the "distressed areas land assemblage" tax credit. It would be redefined to include engineering, site and redevelopment planning, and it would expand coverage of maintenance costs from five years to 12. St. Louis developer Paul McKee attended Tuesday’s hearing but did not testify. Last year he sought to have the program extended to draw an additional $50 million for his North Side Regeneration Project. He had already received $41 million in incentives.
Only a few people testified against the bill, citing concerns over capping incentives for low income housing and historic preservation. James Farrell from St. Louis-based Policy Solutions spoke against the smaller historic preservation cap.
“A lot of small communities utilize this tax credit,” Farrell said. “It’s sometimes one of the few tax credits that they can use in revitalizing their Main Streets or town squares.”
Some Republicans on the committee were surprised and upset that Missouri Right to Life spoke against the proposed Angel Investment Incentive Act. The group’s legislative liaison, Susan Klein, told the committee that as written, the angel investment tax credit would open the door to using public money to fund human cloning and embryonic stem cell research.
“There is bioscience (mentioned) in angel (investment) tax credits,” Klein said. “All we’re asking for is one sentence of protective language that has been consistent with what this legislative body has done (in the past).”
That sparked sharp criticism from state Rep. Noel Torpey, R-Independence.
“I’m wondering why this year you have a problem with it, but last year you did not,” Torpey asked Klein. “Last year, eight times out of the House, not a word (from Missouri Right to Life), and now the first time we bring it up (this year) you’re against it, and it happens to be an election cycle.”
Klein disagreed, saying they changed their position on the bill from “neutral” to “opposed” after their lawyers conducted more research on the bill’s language.
A vote on the omnibus tax credit bill will be held later. Last year’s tax credit measure failed on the last day of the 2013 session, as did a similar bill in 2011.
Follow Marshall Griffin on Twitter: @MarshallGReport