JEFFERSON CITY, Mo. — Some lawmakers worry that Missouri’s income tax cut will leave the state with unpaid bills down the road.
The Governor calls the General Assembly back to Jefferson City to reauthorize tax credits for farmers and reduce the state income tax rate. This special session was to start on Tuesday. Last week, House and Senate leaders said they needed more time to come up with a plan and would wait until the mid-month veto session to meet.
Sen. Lincoln Hough (R-Springfield), vice chairman of the Senate Appropriations Committee, said Monday that he fears what the permanent tax cut will do to investments like education and that all Missourians will not won’t feel relieved.
“Right now we have a little over $4 billion in surplus in the general revenue bank and quite frankly that’s almost entirely due to the federal government money that has flowed into this state. , which allows us to save general revenue from specific lines in the budget,” Hough said.
Parson’s plan would cut the personal income tax rate from 5.3% to 4.8%, increase the $2,000 and $4,000 standard deduction for single and joint filers, and simplify the tax code of the state by eliminating the lower tax bracket. Under the proposal, every Missourian would not be taxed on their first $16,000 of income. Married co-filers would not be taxed on their first $32,000 of income. Changes to the tax code and rate cost the state about $700 million.
“I think given the environment everyone is living in right now, it’s not the 5% state income tax that’s hurting us, it’s inflation that’s hurting us. is eating us all alive,” Hough said. “I would like to see something meaningful for people back home, something that provides long-term tax relief, especially for the lower brackets, but also a one-time reduction that puts money back in their pockets. people.”
Earlier this year, Hough sponsored legislation that would have allowed every Missourian filing a state tax return to receive a one-time $500 credit applied to their return. This bill never left the committee. He said that under Parson’s plan, not all Missourians would feel the relief.
“The biggest tax filing bracket is for individuals earning between $25,000 and $50,000,” Hough said. “If you average that out, a wage earner earning $40,000, as the governor put it, if you cut the number all the way down, that person would get a tax cut of about 80 cents a day.”
In a meeting with the governor to discuss the tax cut, Hough said Parson’s staff provided a spreadsheet showing future expenses.
“I believe it was in fiscal year 2027, we would have consumed all of our reserves,” Hough said. “I don’t think it’s a responsible thing to do given what we have right now as an opportunity to make the investments we have. I will not support anything that will reduce the investments we have made in the education community, transportation for our education system, and our investments in higher education for our two- and four-year institutions.
Parson previously said that for a married couple earning $125,000 a year, they would see an 11% reduction in their tax liability. He also wants to eliminate the lower tax bracket.
It comes after the governor rejected a tax refund plan, different from Hough’s, that lawmakers passed earlier this year. He said he didn’t like that everyone in the state didn’t benefit. He vetoed a plan that would have given some Missourians a $500 non-refundable tax credit based on last year’s filing. It was estimated that this would cost the state up to $500 million.
When Missouri began the new fiscal year, it posted a Record surplus of $4.9 billion. Income taxes are a major contributor to general government revenue. While the cut will cost the state $700 million, Parson said the package takes nothing away from any group or department.
“Something permanent like this is just too risky with our dollars,” Rep. Peter Merideth (D-St. Louis) said. “Three to five years from now, when the economy changes and revenues look different or we can’t keep up with rising costs, we end up with a state that can’t afford to pay our bills.”
Merideth is the Minority Leader on the House Budget Committee. In an interview Monday, he called the governor’s tax cut plan “irresponsible.”
“If we really wanted relief for the people who need it most, we should be talking about sales tax relief that actually affects the price of goods if we’re worried about inflation,” Merideth said. “We could exempt groceries from sales tax, but an income tax cut where someone making a million dollars a year is going to save $6,000 and working-class families may see -be a few dollars a week, I don’t think that’s the way to bring the best relief to people.
Another part of the game plan is to help one of Missouri’s biggest industries: agriculture. The Show Me State is home to 95,000 farms, ranking second in the nation and third for beef cows.
Part of the call for a special session is to reauthorize tax credits for farmers. Under legislation passed by lawmakers this year, the tax credits expire in two years. The governor said there was not enough time to start new projects using the credits. Parson is asking for a six-year sunset clause.
Parson said there were too many special interests, lobbyists and people involved who shouldn’t be involved in the legislation passed in the spring. The governor, himself a farmer, said earlier this year that filling three tractors on the same day cost him $500.
Parson’s plan calls for creating tax credit programs for retailers of high-ethanol and biodiesel fuels, in-state biodiesel producers, establishing or improving farm operations urban crops and the creation of the Specialty Agricultural Crops Act. Tax credits would be extended for improving meat processing facilities, transportation of agricultural products, and an exemption for certain vehicles from state and local sales and use taxes.
The creation or extension of the aforementioned agricultural programs would last six years, according to the governor.
Hough, a cattle rancher himself, says investment in the agriculture industry is extremely important.
“Any investment we make in the agriculture industry will ultimately help those people back home, whether you directly benefit from it or not,” Hough said. “My neighbor who operates a beef cattle operation, whether he actually receives a state tax credit through one of these programs is not likely, but any investment we make in the industry adds value.”
Over the past month, Parson has met with local leaders and lawmakers on both sides of the aisle regarding his call for a special session. While in office, Merideth says he doesn’t recall having a conversation with the governor at any other time for a special session.
“I think he wants to make sure it’s not just some crazy right-wing tax cut,” Merideth said. “We have seen a lot of dysfunction among Republican leaders. It’s no secret I’m not crazy about this plan, but I’ll admit it’s far better than some of the conservative alternatives.
The rooms in the house are currently being renovated. It’s the first major project since the 1980s. Upgrades include new voting boards, carpeting and wiring. The goal was to complete it by mid-September, but with a delay in shipping and a special session, members will have to make do.
Representatives will use folding tables as desks and sit on plastic chairs. Benches, desks, and furniture line the hallways outside the lower chamber. The project was to go through a veto session which takes place on September 14 but due to shipping delays for the rug, the project is now on hold.
“I think the point is that for something like a permanent tax cut, we should wait until we’re back in session with a proper chamber in place and have a proper debate instead of this mess thrown in together,” Merideth said.
House and Senate leadership plans to meet again on Tuesday to iron out more details about when the special session will start.
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