JEFFERSON CITY, Mo. — Missouri senators on Tuesday gave first-round approval to a bill to cut state individual income taxes as called for by Republican Gov. Mike Parson.
The GOP-led Senate’s compromise plan would immediately cut the top income tax rate from the current 5.3% down to 4.95%. Parson had asked lawmakers to take the top tax rate to 4.8%.
Some lawmakers said Tuesday, their plan is a responsible and careful way to give taxpayers some relief.
“I think this is a very reasoned approach to this, we’re not cutting too fast, I don’t believe so,” said Sen. Andrew Koenig, R-Manchester.
In his special session call, Parson also directed lawmakers to increase the standard deduction by $2,000 for single filers and $4,000 for couples. He limited tax cuts to a maximum $700 million price tag per year.
Senators did not debate a separate proposal mirroring Parson’s wish list on Tuesday.
Instead, lawmakers moved forward on a plan that includes the possibility for even deeper tax cuts. Under the Senate’s proposal, gradual cuts to the top income tax rate would be triggered by general revenue growth benchmarks tied to inflation. Income taxes could drop to as low as 4.5% under the measure.
“This is a very reasoned approach to this,” said Republican Sen. Andrew Koenig, a member of the now-dissolved Conservative Caucus, during Senate debate. “We’re not cutting too fast.”
“Currently, this year’s revenues are up by several hundred million dollars just in the first couple of months,” Koenig said. “I think ultimately we would get to that 4.8% that the governor had in his call pretty quickly.”
The legislation comes after months of behind-the-scenes negotiations.
Parson proposed the special session as an alternative to lawmakers’ planned one-time tax refund, which he vetoed in June. He called on lawmakers to return to work on Sept. 6, but they pushed back work to continue private talks in search of a consensus on the issue.
“If you’re an individual earning roughly $14,000 or less, you will not pay any individual income taxes,” said Sen. Lincoln Hough, R-Springfield, who co-sponsored the bill with Koenig.
Senate Bills 3 and 5 were combined during a Senate budget hearing Monday. The plan would reduce the income tax rate to 4.95% by 2023 and then future reductions would only happen if certain revenue growth is met. Under the legislation, Missouri’s revenue must grow by $175 million in the first year and by 2025, revenue must grow by at least $200 million to lower the income tax rate. When fully implemented, Missouri’s income tax rate would be 4.5%.
Some Republicans want even deeper tax cuts, while Senate Democrats on Tuesday pushed to send Missourians one-time checks this year in lieu of income tax cuts that they warned could mean less money for education, infrastructure and other expenses in the future.
“It’s very concerning to me that we’re doing something with short-term dollars and we’re making it stick long term,” said Democratic Sen. Jill Schupp.
According to the Missouri Budget Project, if a Missouri household makes $13,000 a year, they would save $3 under this plan. Those making $30,000 would roughly save $17. Taxpayers with incomes of between $40,000 and $52,000, they would see an average tax cut of $66 in 2023.
Those earning between $66,000 and $86,000 would save $143. Missourians making somewhere between $110,000 and $152,000 would save $348, those making around $332,000 would save $826 and taxpayers making between a half a million and $1.5 million would save around $4,000.
“They [Republicans] are going to fail to mention that constituents that makes $40,000, probably means you get $2 or $3 extra per paycheck,” said Sen. Greg Razer, D-Kansas City.
The governor’s call for a special session came after he rejected a rebate plan that was passed by lawmakers during regular session. The legislation would have given taxpayers checks worth up to $500 for individuals and $1,000 for couples.
“It was a bipartisan plan, we were all behind it and the governor vetoed it,” Schupp said. “My concern for the long haul is once we put it into place, there’s no turning back except by the vote of the people.”
The compromise measure needs another vote of approval by the full Senate before it can move to the House.
The upper chamber also gave first-round approval to legislation that contains tax credits for farmers. The governor vetoed that bill after regular session because he wanted a six-year plan instead of two.
The tax incentives help farmers and ranchers throughout the state. It includes the creation of tax credit programs for retailers of higher ethanol blend fuels and biodiesel, in-state biodiesel producers, establishing or improving urban farm operations, and creating the Specialty Agricultural Crops Act.
Tax credits would be extended for meat processing facility improvements, transportation of agricultural goods, and an exemption for certain vehicles from state and local sales and use taxes.
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