CHICAGO - Missouri's Republican-led General Assembly overrode Gov. Jay Nixon's veto of a $620 million tax cut package, ignoring his warnings that it could jeopardize the state's top credit marks.
One House Democrat joined Republicans to reach the two-thirds required for the override of the Democratic governor's veto. The vote tally in the House Tuesday was 109-46. The House action on Senate Bill 509 followed the Senate's 23-8 vote along party lines Monday to override the veto.
Nixon slammed the action and warned that the tax cuts, which would be phased in as soon as 2017, would hurt public education and could damage the state's gilt-edged ratings.
"While its authors may have delayed its impact, Senate Bill 509 remains a very real threat to the principles of fiscal discipline that have helped us maintain our spotless AAA rating for decades," Nixon said in a statement after the House vote. "As I have from day one, I will continue to manage the budget with the resources available and keep our state moving forward."
The General Assembly last year, due to some GOP opposition, failed to override a Nixon veto of a similar tax cut package that carried a higher price tag and more complex features. The package approved this year was smaller and had the support of all Republicans.
In his veto message last week, Nixon called the bill "an unfair, unaffordable and dangerous scheme that would defund our schools, weaken our economy, and destabilize the strong foundation of fiscal discipline that we've worked so long and hard to build."
Nixon contends an independent fiscal analysis found the bill could end up costing the state $4.8 billion annually due to language that eliminates taxes on the highest bracket. Under the legislation, he said, most residents would fall under the highest bracket eliminating 65% of state revenue.
Republicans have called Nixon's claims ridiculous.
The legislation would gradually cut the state's top individual income tax rate to 5.5 % from 6% and phase in a 25% cut for business income. Republicans estimate the total annual cost once all pieces are phased in to be $620 million.
The tax cut would only begin to be phased in starting in 2017 if revenue collections rise by a minimum of $150 million annually from a high benchmark over the previous three years. Republicans have touted the trigger as a protective measure against damage to the state's fiscal foundation.
Nixon sought to capitalize on Moody's Investors Service downgrade last week of neighboring Kansas to help make his case of the potential credit damage.
Moody's dropped Kansas' issuer rating to Aa2 from Aa1 citing as one factor lost revenue from tax cuts that weren't balanced with spending cuts.
"This week's report by Moody's demonstrates the very real and dangerous consequences of fiscal experiments like Senate Bill 509," Nixon said. "For decades, Democrats and Republicans have worked together to keep Missouri on a fiscally responsible path and protect our spotless AAA credit rating - a rock solid foundation of fiscal certainty that Senate Bill 509 would put at risk."
Like Kansas' 2012 legislation, the Missouri version also creates an exemption for business income reported by "pass-through entities" such as limited liability companies and corporate partnerships.
