KANSAS CITY, Mo. – Calling it an “ill-conceived, fiscally irresponsible experiment,” Missouri Gov. Jay Nixon on Wednesday vetoed tax-cut legislation approved by the General Assembly.
He announced his decision at the Henry W. Bloch School of Management at the University of Missouri-Kansas City, joined by higher education officials, local business leaders, advocates for seniors and children and members of area school boards.
The governor also said the measure was “riddled with drafting errors,” including one that apparently inadvertently would repeal a long-standing sales-tax exemption on prescription drugs.
As part of a Democratic party that is significantly outnumbered in the General Assembly, Nixon’s veto sets up a showdown with Republicans when the legislature reconvenes for its veto session Sept. 11.
According to various official estimates, the measure, which included a combination of tax reductions for businesses and individuals, could have reduced state revenue between $700 million and $800 million a year.
Supporters said Missouri needed the legislation, in part, to keep pace with Kansas, where Gov. Sam Brownback last year signed into law a tax-cut package aimed at spurring economic growth. Official estimates then put the cost of the Kansas bill at approximately $2.9 billion over five years. The Kansas Legislature last week passed a new tax measure intended to offset some of the costs of the 2012 tax cuts.
“Thousands of jobs have been lost in western Missouri as businesses flock to Kansas to take advantage of massive tax cuts,” Missouri House Speaker Tim Jones, a Eureka Republican, said criticizing Nixon’s veto.
Nixon said his administration had created a strong business climate in the state by shrinking state government, maintaining a strong bond rating, and approving a past measure that eliminated the corporate franchise tax.
He noted the recent decision by an automotive supply company to build a $45 million manufacturing facility in Riverside, Mo., even though it is supplying a General Motors assembly plant in nearby Kansas City, Kan.
In his veto statement, the governor said studies from tax organizations and accounting firms ranked Missouri one the lowest tax states in the country.
“So today the question before us is simple,” Nixon said. “Will we continue on this proven, steady, fiscally responsible path, or will we veer recklessly off course?”
Among other provisions, the measure approved by the General Assembly would decrease the individual income tax rate by half a percentage point over the next decade. The bill also would reduce the corporate tax rate by 3 percentage points over the next decade.
The measure includes a so-called “circuit breaker” that would halt the decreases if year-to-year tax revenues fell by least $100 million.
State Sen. Will Kraus, a Lee’s Summit Republican who supported the measure, said that the 10-year phase in and the circuit breaker that were included in the bill made it “a responsible way to make Missouri more competitive in the national job market.”
But Nixon and other speakers at Wednesday’s press conference, including local public relations executive Betsey Solberg, portrayed the measure as something that would cut funding for education at all levels, threatening Missouri’s ability to compete in the global economy.
“A strong business environment requires that we have excellent schools, first-rate, affordable colleges and universities and schools all over (that) produce a workforce that is skilled for the 21st century,” said Solberg, who spoke on behalf of Kansas City business leaders.
She is also president of the UMKC Foundation.
Achieving savings to make up for the lost revenue included in the bill, Nixon said, would have required the equivalent of closing all the state’s prisons or shutting down the Missouri Department of Mental Health.
He conceded nothing in the bill required such steep cuts in those specific government services, but he said such a significant loss of state revenue would require spending cuts for schools and prisons, which receive large sums of general state revenue.
Nixon said eliminating tax credits would be another way to make up for the lost revenue without cutting spending but he said he had not had much luck on that front with the General Assembly.
Nixon said he was optimistic his veto would be sustained.
“Today begins an effort to have a good, strong communication with Missourians and I feel very confident that the points we lay out here are important,” he said.
Krauss said he was confident the Senate would overturn the veto, if it gets the chance.
And, he said, “If for some reason we cannot override this veto, I can assure you I will be back with a similar bill next year.”