The effort to override the governor’s veto of our pro-jobs, pro-growth tax cut legislation began Monday, May 5th as the Senate quickly took up and approved the motion with a supermajority. We followed suit in the House Tuesday morning as all 108 members of the Republican Caucus were joined by one Democrat who agreed with us that substantive tax relief for families and businesses is the right step to promote growth and prosperity in our state.
With the override in both chambers, we are now set to reduce the state income tax for the first time in nearly a century. The bill will provide tax relief to approximately 2.3 million families and 121,000 small businesses in Missouri.
This monumental victory for the people of Missouri was possible because of the hard work and efforts of many of my colleagues who spent the last several months diligently working to craft a responsible tax cut plan. If you recall, last year we took on the governor on the tax cut issue and he responded by using taxpayer dollars to fly around the state to spread falsehoods about the bill. This year he again resorted to his old tactics, but the truth of this carefully crafted plan was too much for him to overcome. In the end, truth won out over the governor’s smoke and mirrors campaign, and the result is a big win for Missouri taxpayers.
The version of the bill now set to become law will begin taking effect in 2017. The delay was put in place to give the legislature the opportunity to fully fund the K-12 school funding formula before the phase-in starts for the tax cut. Once implemented, SB 509 will cut the income tax for the first time in nearly a century and will provide additional tax relief to low income citizens. The bill will reduce the individual income tax by a total of one half percent over a period of five years. The phase-in of the tax break will be based on revenue increases of at least $150 million each year. The bill will also provide additional relief to lower income Missourians by increasing the personal income tax exemption amount by $500 for taxpayers with an adjusted gross income of less than $20,000.
The bill is designed to spur job creation by allowing Missouri employers to keep more of their income so it can be reinvested in their businesses. Beginning in 2017, the bill phases in a 25 percent deduction for income tax over a period of five years. The deduction is specifically tailored for small business owners, who make up more than 90 percent of employers in the state, so they can thrive and grow. Our hope is that allowing our industrious small employers to keep more of their income will allow them to grow their businesses and create more good-paying jobs.
As we talk about the tax cut, it is important again to highlight the safeguards in the bill that will require revenues to increase by at least $150 million each year for five years in order for the tax cut to be fully implemented. The end result will be at least an additional $750 million in revenues before the full $620 million tax cut is in place. While some have tried to paint a tax cut as a threat to education funding, the version of the bill passed this year will work to ensure that funding for our schools continues to increase year after year.
As we look at ways to make Missouri more competitive with the other states around us, it is obvious that we must embrace the reality that a lower tax burden will help stimulate economic growth. We know that Missourians know better how to spend their hard-earned wages than does the government. By overriding the governor’s veto, we made it clear that our investment should be in Missouri families and businesses and not in growing the size of government.
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