HB 2540, sponsored by Speaker Pro Tem Elijah Haahr, was heard today in the Senate Committee on Ways and Means. Speaker Pro Tem Haahr has met with us regarding our concerns with the House version of the bill and we look forward to working with him to resolve our issues before the bill advances further.
As passed by the Missouri House, the bill would result in the largest tax increase ever on Missouri corporate taxpayers and would increase taxes for 95% of Missouri businesses that report their business taxes on their individual income tax returns by freezing the business income deduction at 5% rather than allowing that deduction to increase to 25% over time. The tax increases would be used to fund a new tax credit for lower income individuals.
Witnesses for the bill included the Missouri Chamber of Commerce and Industry who testified in support, but noted several reservations with the bill.
Associated Industries of Missouri president and CEO Ray McCarty testified against the bill, and noted he was working with the sponsor to eliminate objectionable provisions.
“Associated Industries of Missouri is opposed to this bill as it currently stands because it would enact the largest tax increase on employers in Missouri history,” said McCarty. “This tax increase is at least $85 million for corporations. The previous largest corporation income tax increase was $80 million in 1993 when SB 380 was enacted by the late Governor Mel Carnahan and the Democrat-controlled legislature raising the corporation income tax rate from 5% to 6.25% and eliminating 50% of the federal income tax deduction for corporations. We are opposed to raising taxes on employers of Missouri and using that money to fund tax cuts for others.”
“We also object to the ‘freezing’ of the business income deduction that will increase to 25% under current law if state revenues continue to increase over time,” he said. McCarty explained the business income deduction currently in law was the result of a conversation with an AIM member that inspired development of a mechanism that will reduce income taxes for 95% of Missouri businesses that report their taxes on their individual income tax returns. “We do not want to see the benefits of that tax cut, enacted by this legislature over the objections of former Governor Jay Nixon, limited in this bill,” said McCarty.
McCarty suggested the Committee consider using the approach used in a bill approved by the Missouri Senate earlier, SB 674, that applied tax reforms for corporations to a cut in the corporation income tax rate. He suggested the Committee consider doing the same type of reform within the individual income tax system.
The Committee adjourned before all witnesses against the bill could be heard. A substitute bill is anticipated from the Committee before the bill advances from Committee.