By Kevin Murphy
KANSAS CITY, Missouri (Reuters) - Missouri Governor Jay Nixon on Wednesday vetoed legislation to sharply reduce corporate taxes that lawmakers said would help Missouri compete with neighboring Kansas and other states, saying the reductions would jeopardize critical state services.
"With a price tag of $800 million, this legislation is an ill-conceived, fiscally irresponsible experiment that would hurt our economy and jeopardize funding for vital public services," Nixon said in a statement accompanying his veto message.
Representative T.J. Berry, a leading Republican sponsor of the bill, said on Wednesday, however, that Nixon was exaggerating the impact of the proposed cuts, which would only apply in years when tax collections were up by certain amounts from prior years.
The bill would cut the corporate tax rate to 3.125 percent from 6.25 percent over 10 years. It also calls for taxes on income a business owner declares on a personal return to decline by 50 percent over five years.
Missouri's state House and Senate, both dominated by Republicans, approved the tax cuts overwhelmingly in May and the veto by Nixon, a Democrat, could face a close override vote when lawmakers meet in September for their veto session.
A two-thirds majority is needed to override a veto in Missouri and representatives cast 103 votes for the bill with five Republicans absent, leaving it close to the 109 votes needed. More than two-thirds of the Senate supported the bill.
"Writing a bad check and saying you'll figure out a way to pay for it later might make sense in Washington, D.C. and some other states, but it's not how we do things in Missouri," Nixon said.
Berry countered, "His statements were in many ways misleading and disingenuous considering that every one of the steps in the tax cuts has to be countered by a revenue increase," Berry said. "I find his math to be fuzzy."
The non-profit Missouri Budget Project, which monitors state spending, estimated the bill would cost the state more than $850 million in annual revenue when in full effect, but Berry said state estimates were less than $700 million and ranged downward depending on what cuts would actually be imposed.
The Civic Council of Greater Kansas City had urged Nixon to veto the bill, saying the state already has a competitive tax and regulatory environment and the cuts would force drastic cuts to education, social service and infrastructure funding.
Missouri lawmakers were under pressure to respond to cuts Kansas made last year in its corporate and individual income taxes, which Kansas offset partly by retaining certain sales taxes.
(Editing by David Bailey; Editing by Steve Orlosky)