Senate panel looks at slashing of business taxes

(MDN News) -- Republicans in the Missouri Senate are looking to dramatically lower the tax bills of business owners in the state, saying that the actions of surrounding state legislatures could leave Missouri's economy in the dust if lawmakers don't act quickly.

Sens. Eric Schmitt, R-St. Louis County, and Will Kraus, R-Lee's Summit, have each put forth proposals that would cut the state's corporate income tax rates and also allow business owners to deduct part of their business income on their individual tax returns.

Both senators told a Senate tax committee this week that the changes are necessary if Missouri wants to compete with states like Kansas. As of Jan. 1, some business income in Kansas is now exempt from the state's income tax and conservative lawmakers there are now pushing to eliminate the individual income tax altogether.

"The fact of the matter is, we are in a competition among other states," Schmitt said. "We don't operate in a vacuum. We're part of a larger decision-making process for business owners."

Schmitt's measure would cut the corporate tax rate from the current 6.25 percent to 3.125 percent by 2017 and would allow business owners to deduct half of their business income. The proposal from Kraus would allow a 25 percent deduction and would reduce the corporate rate to 3.25 percent by 2017.

A fiscal estimate attached to Schmitt's bill said it could cost the state as much as $200 million in revenue by 2016, while the cost of Kraus' bill was pegged at more than $924 million per year within three years.

Sen. Paul LeVota, D-Independence, said he is worried that taking that much revenue from Missouri's tenuously balanced budget could put vital state services, such as education or road construction, on the chopping block.

"We've seen the Kansas cut and now they can't fund their schools," LeVota said. "We see that we have cut and we've given away a lot of tax credits and now we can't fund our foundation formula. If we dig into tax policy that helps create jobs, which we all want to do, let's make sure that we're still paying for the basic obligations of the state."