Koch brothers' nonprofit won't support Missouri Senate's tax reform plan

JEFFERSON CITY — The Missouri Senate's current proposal for tax reform lacks the support of an influential conservative political advocacy group backed by the billionaire Koch brothers.

The Missouri branch of Americans for Prosperity, a nonprofit funded by Kansas billionaires Charles and David Koch, believes the Senate's tax plan would do more harm than good.

Missouri lawmakers are mulling a plethora of proposals to change the state's tax code following federal action to do the same. Their efforts, which generally are aimed at cutting income taxes while raising some revenue, have resulted in three plans from the Senate, the House and Gov. Eric Greitens.

All three plans slash individual and corporate income taxes while moving to collect sales taxes on online purchases made from out-of-state retailers and limiting how companies could calculate their taxable income.

The Senate's plan would reduce the top personal tax rate from 5.9 percent to 5.25 percent and eventually step that down to 4.85 percent as long as state tax collections remain stable, with an additional 0.3 percentage-point reduction possible if federal action is taken to mandate sales tax remittance for e-commerce by out-of-state companies.

The corporate rate, under the Senate plan, would drop from 6.25 percent to 4.25 percent while eliminating a state deduction for corporate federal tax liability.

That's all fine for Americans for Prosperity, but the plan is dragged down by other provisions, state director Jeremy Cady told the News-Leader.

Where the Senate plan goes wrong is by creating a tax credit to pay for Capitol restoration and by increasing the state motor fuel tax by six cents per gallon over several years, Cady said.

"While there are some good components of responsible tax reform in this bill, it's ultimately something we can't support considering all the harmful tax provisions that weigh it down," Cady said in a statement. "The goal of tax reform should be to make our code fairer, flatter, and simpler while letting Missourians keep more of their hard-earned money — this doesn't accomplish that."

Cady didn't raise opposition to the goal of the Capitol tax credit but said that "if the legislature wants to do it, they need to do it through the appropriation process, not the tax credit process."

And when it comes to the gas tax, "that's regressive," Cady said. "That's going to hit our low-income earners in the state more than it's going to hit our middle and high earners."

The same logic gives Cady concerns about the Senate's plan to mirror the federal earned income tax credit, which would help low-income earners, particularly those with children. "Simpler, flatter and fairer is what we push for."

The prospect of Missouri overhauling how it collects revenue — and how much — consistently raises the specter of Kansas, which slashed taxes expecting levels of growth that never came and is still fighting to emerge from the hole it created. 

In Missouri, Greitens' plan in particular takes pains not to drastically cut discretionary spending, and Rep. Elijah Haahr, the Springfield Republican heading the House tax change efforts, has told the News-Leader he wanted the overall fiscal impact of his bill to be as close to $0 as possible.

However, there is a significant proportion of Missouri Republicans who believe that Missouri needs to shrink the size of its government. One major way to do that is to reduce revenue and cut state services. 

Cady, for his part, says that lawmakers "need to get out of the idea that whatever tax reform comes out of the General Assembly needs to be revenue-neutral." 

"We should be doing more to cut spending and watch our spending than prioritizing being revenue-neutral," he said, adding that he didn't focus much attention on Greitens' plan due to the fact that "it wasn't going to move much" in the face of Senate opposition

Americans for Prosperity, the political wing of the Koch brothers' network, has the resources to throw its weight around if it sees fit. The nonprofit recently announced a $1.8 million advertising push to criticize Democratic Sen. Claire McCaskill for voting against the federal tax bill. 

Because Americans for Prosperity is a 501(c)(4) nonprofit, it does not have to disclose its donors.