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Legal experts spar over tax cut bill

Scott Lauck//April 22, 2014

Legal experts spar over tax cut bill

Scott Lauck//April 22, 2014

A major tax cut bill that Gov. Jay Nixon is likely to veto has drawn dueling legal opinions about its effect.

Nixon on Tuesday released an opinion by Cheryl D. Block, a tax law professor at the Washington University School of Law, who said the wording of the bill would eliminate Missouri’s top income tax bracket. In a separate analysis, the Office of Administration said that would reduce state general revenue by approximately $4.8 billion annually.

Republican leaders in the House and Senate, in turn, released a statement from former Missouri Supreme Court Judge William Ray Price Jr., who said he believed Missouri courts would find that a 5.5 percent tax rate would still apply.

The bill, one of Republican lawmakers’ top priorities, passed earlier this month on largely party-line votes. Among other things, the bill would cut state income tax rates for the first time in decades.

Current law bases tax rates on the taxable income earned in $1,000 brackets, the highest of which is just $9,000. As incomes have risen over the years, most Missourians now pay the top rate of 6 percent. The bill calls for the top rate to be reduced gradually to 5.5 percent, starting in 2017 and contingent on certain levels of annual state revenue growth.

Block’s analysis, however, points out that the bill says the “bracket for income subject to the top rate of tax shall be eliminated” once the top rate of tax has been reduced.

“As presently drafted, the bills’ language appears to have the perverse result that those with incomes between $8,000 and $9,000 would be subject to a five and one-half percent tax rate, while those over $9,000 would pay no tax at all,” Block wrote.

Price’s counteranalysis was touted in a press release by House and Senate leaders. Price pointed to “the plain language of the full” bill, specifically to language that says the Department of Revenue “shall, by rule, adjust the tax tables” to carry out the provisions of the bill. The 5.5 percent tax rate, Price wrote, would apply to all income over $8,000.

“While it is true that taxing statutes are to be construed against the taxing authority, that construction must be reasonable and not against the legislature’s intent,” Price wrote. Price left the Missouri Supreme Court in 2012 and is now in private practice with Armstrong Teasdale in St. Louis.

The bill is SB509 & 496.

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