The Missouri legislature has passed an income tax reduction.

Photo courtesy of Tim Bommel, House Communications

Several proposals were introduced earlier in the legislative session that offered differing versions to massively overhaul the Missouri tax system.

The various plans came on the heels of a federal tax package passed by Congress in late 2017. What the state legislature settled on going into the final day of the session is a much more stripped down and straightforward income tax reduction.

The rate would be sliced from 5.9% to 5.5.% beginning next year.  It would gradually be reduced to 5.1% if the state meets targets for income tax growth.  The final product started as a far-reaching tax blueprint from Republican Representative Elijah Haahr of Springfield which passed the House in mid-April.

The measure then stalled in the Senate where leaders in the GOP led chamber expressed apprehension that such sweeping legislation could leave the state with a massive deficit.  Comparisons to Kansas, which lowered and eliminated some income taxes with disastrous results, began to be uttered.

Senate President Pro Tem Ron Richard repeatedly expressed concern that the wide-ranging tax plans might force large cuts in state spending that could devastate key programs.  Senate Appropriations Committee Chairman Dan Brown weekly reminded reporters that Missouri is already a low-tax state that provided fewer services to residents.

The simple income tax cut that emerged from the Senate came on a largely party-line vote Tuesday night with the Republican supermajority prevailing 23-9.  The House gave its final approval Thursday on a similar tally mostly on party lines 101-40.

The income tax cut, which will now head to the governor’s desk, essentially speeds up a gradual reduction lawmakers passed in 2014.  Unlike the measure already in place, the bill just approved by the legislature seeks to offset expected revenue losses from the tax cut by gradually phasing out the federal income tax deduction.

Separately, a corporate tax reduction from Republican Senator Andrew Koenig of Manchester will likely emerge from a conference committee and see a vote in both chambers on the last day of the session Friday.

As it stands now, the corporate rate would be reduced from 6.25% to 4% and would go into effect in 2020.  The measure (Senate Bill 884) has bounced between the House and Senate during to the last day or so.

Finally, the Senate passed a bill by Republican Dave Schatz of Sullivan to raise the motor fuel tax from $0.17/gallon to $0.27/gallon over a period of four years, with an annual increase of two and one-half cents per gallon.  The House will have to pass that proposal Friday for it to reach the governor’s desk.