Law professors say tax cut bill may cost Missouri billions

Two MU law professors say assertions that a GOP-backed tax cut bill would cost the state $4.8 billion may be correct.

Two MU law professors indicated Wednesday a tax bill awaiting action by the governor might cost the state close to $5 billion.

Prof. Michelle Cecil, who specializes in tax law, told KRCG 13 Gov. Jay Nixon's office was correct when it claimed a subsection in Senate Bill 509 would eliminate the income tax for any Missourian making more than $9,000 per year. She said she thought the bill's sponsors put the provision in as a result of sloppy drafting rather than a sincere effort to eliminate that portion of the state's tax revenue, but she felt the language was very clear.

"The state would not be able to function if all income over $9,000 were not taxed," she said.

The section of the bill in question reads, "The director of the department of revenue shall, by rule, adjust the tax tables under subsection 1 of this section to effectuate the provisions of this subsection. The bracket for income subject to the top rate of tax shall be eliminated once the top rate of tax has been reduced to five and one-half of a percent."

Nixon and the General Assembly's Republican majority have repeatedly attacked each other over the bill since April 22, when Nixon barnstormed the state, calling attention to the provision. Nixon said the bill would deprive the state of $4.8 billion in income tax revenue each year. For Fiscal Year 2015, Nixon's office is estimating a total of $8.7 billion in general revenue, with $5.9 billion of that coming from individual income tax.

"This bill, and the direct language of this bill, crashes a giant hole in the future of this state," Nixon said that day.

Republicans were quick to dismiss Nixon's claims as ridiculous. They pointed out the legislature's Committee on Legislative Research consistently estimated the bill would reduce revenue by a little less than $621 million.

"They looked at it twice, they never discovered it," said Rep. John Diehl, R-Town and Country. "This is made up and made to distract from the real issues."

The bill's author, Sen. Will Kraus, R-Lee's Summit, noted the bill's tax reductions would not kick in until the state had taken in an additional $750 million in revenue.

Prof. Royce Barondes, who specializes in corporate and securities law, was less certain of the bill's outcome but did not rule out the possibility that Nixon's estimate might be correct. Like Cecil, Barondes said the bill's language was not drafted well, and he said the income tax might be eliminated if the bill was not amended. But Barondes said that would be an extreme interpretation of the bill. He said if the bill went to court, judges would most likely rule the bill does not eliminate the top income tax bracket because the courts can interpret laws in a way that avoids "unreasonable, absurd or oppressive results."

"At the moment, it would not appear to me to be anything other than absurd" to make income over $9,000 not subject to tax, Barondes said.

Gov. Nixon has until Thursday to act on SB 509 or it will automatically become law. Although he has not said he would veto the bill, he is very likely to do so.