Analysis: Mo. business tax break has wide reach

JEFFERSON CITY, Mo. (AP) - Legislation awaiting a likely veto by Missouri Gov. Jay Nixon would create a new tax break for the owners of local diners and downtown antique stores. Accountants and doctors could benefit, too. And farmers and car dealers and architects.

So could lawyers and lobbyists.

Nixon has focused on those latter two professions while denouncing the legislation as an unaffordable giveaway to special interests that would provide especially generous benefits for folks that dont need anything.

But Nixon may be oversimplifying the issue while highlighting his opposition.

He could just as easily describe it as a break for ambitious college students running their own lawn-mowing services over the summer. They would benefit, too.

The legislation would gradually cut Missouris top individual income tax rate to 5.5 percent from 6 percent. It also would phase in a 25 percent deduction for business income reported on personal tax returns - a category referred to as pass-through income.

Its true that many lawyers and lobbyists would benefit from the new tax deduction because of the way their businesses are structured. But so would most Missouri businesses.

If the policy decision is made to provide a tax cut to businesses, you have to figure out some way to address pass-through entities, because thats the vast majority of all businesses, said Chuck Pierce, a lobbyist for the Missouri Society of Certified Public Accountants.

The tax break would not apply to C corporations - which generally are publicly traded - because they pay a separate state corporate income tax. But it generally would apply to businesses structured as sole proprietorships, partnerships and limited liability corporations.

Missouri has more than 500,000 active businesses registered with the secretary of states office. Nearly four-fifths of those are limited liability corporations. Each of those businesses could have multiple owners, partners or members claiming the tax deduction.

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Analysis: Mo. business tax break has wide reach