j ames r. m oody & a ssociates g overnmental r elations c onsultants problems with house bill...

JAMES R. MOODY & ASSOCIATESGOVERNMENTAL RELATIONS

CONSULTANTS

PROBLEMS WITH HOUSE BILL 253

August 2013


CONSULTANTS

The Proponents Argue Happy Days Are Here Again, So Let’s Cut Taxes!!

• Not true.• Most of the FY 2013 increase in general

revenue came from increased capital gains taken in late CY 2012.

• Individual income tax withholding grew 3.5%.

• Sales tax grew 1.3%.


CONSULTANTS

Rockefeller Institute Report on Capital Gains“Time Bandits”

• In 2010, “…0.9 percent of taxpayers accounted for 86 percent of capital gains.”

• For states, “the fourth and final payment of estimated taxes rose by 25.2 percent.”

• Federal taxes, “nonwithheld taxes for April and the first few days of May were up by 37 percent.”


CONSULTANTS

What are the problems with HB 253?

Riddled with technical flaws

Bad tax policy

Even worse public policy

Helps the rich, hurts the middle and lower classes


CONSULTANTS

Who Does HB 253 Help?

• The proponents are running ads with what look like middle class workers in the background, implying the tax cut is for the middle class.

• HB 253 does virtually nothing for the middle class. Those ads are a scam.

• HB 253 is aimed at the wealthy, not the middle class.


CONSULTANTS

Taxpayer Fairness and Equity

Family Size Taxable Income First Year HB 253 Tax Cut

3 $30,000 $90

4 $48,277 $6

3 $60,000 $15

2 $225,000(net)

$1,100

2 $500,000(net)

$2,400


CONSULTANTS

Missouri Families Lose


CONSULTANTS

Triggers

• There is no trigger for the 50% reduction for business income.

• The .5% reduction in income tax rates tied to passage of federal Marketplace Fairness has no other trigger.

• The only triggers are for the rate cut, and year one will already be triggered. So only the middle class cut are subject to a trigger.


CONSULTANTS

Marketplace Fairness

• No sunset on the linkage, no other trigger.• Fiscal note assumes new general revenue of $342

million to $542 million. There is no reputable study or basis for this number.

• Most reputable study would indicate general revenue increase is only $80 million.

• When triggered this tax cut will leave a quarter billion $$ hole in the budget.


CONSULTANTS

Other Fiscal Note Problems

• The fiscal note assumes business income is only Line 12—Business Income.

• It excludes Schedule D (capital gains), Schedule E (rental and royalties), and Schedule F (farm income).

• These taxpayers will assert their income is business income.

• The fiscal note does not account for any shifting of income to business income. This will occur.


CONSULTANTS

A 50% reduction in business income cuts taxes by more than 50%

• Business income is Line 12 of Form 1040. There are income related deductions below Line 12 that are fully allowed, even though income is cut in half.

• Effective tax reduction for many businesses will be 70% to 80%.


CONSULTANTS

Long Term Ramifications of HB 253

• Middle class will understand “they were had” and will want tax relief for themselves.

• Taxpayers with capital gains, rental and royalty income, and farm income will also figure out “they were had” and ask for tax relief.

• Tax relief for the wealthy cannot be undone without a vote of the people.

• State services will suffer.• Tax anarchy and chaos will ensue.


CONSULTANTS

Difficult to Reverse

Constitutional requirements LOCK-IN changes

Ensures that the worst of this recession will be the normal

HB 253


CONSULTANTS

Bottom Line for HB 253

It is a tax cut bill for the wealthy. The proponents with their TV ads are scamming the middle class into thinking they will get a

significant tax reduction. They will not.

j ames r. m oody & a ssociates g overnmental r elations c onsultants problems with house bill...

Documents

j ames

business income

tax cut

income tax rates

middle class cut

shifting of income

percent of capital gains

sales tax