GOP-controlled Missouri Senate approves bill that would cut state’s income tax rate

Despite some pushback from Democrats and budget analysts, the Republican-dominated Missouri Senate on Wednesday approved a bill that would cut the state’s income tax rate.

The bill passed the upper chamber on a vote of 24-4. It would lower the top state income tax rate from 5.3% to 4.95% starting next year. The top state income tax rate applies to Missourians who make roughly $22,000 or more a year. If the state experiences revenue growth, the rate would drop to 4.5% when the plan is fully implemented in five years.

The legislation now heads to the House. The Senate bill is a modified version of Republican Gov. Mike Parson’s special session call, where he asked legislators to lower the state’s income tax rate to 4.8%. Parson’s plan did not call for gradual cuts.

An analysis of the plan published Tuesday by the Missouri Budget Project, a nonprofit that analyzes fiscal policy, found that the bill would leave out one-third of Missourians. It also found that taxpayers making $22,000 or less would each receive an average cut of $3 while those in the top 1% would receive an average cut of $4,214 next year.

“We’re extremely disappointed that Missouri Senators chose to advance income tax changes that will have a big impact on state services, but provide little help to most Missourians,” Amy Blouin, the group’s president and CEO, said in a statement Tuesday.

State Sen. Lincoln Hough, a Springfield Republican and one of the the bill’s sponsors, said on the floor Wednesday he considered the bill a “responsible package” that lowers the state’s top income tax rate in “a reasonable fashion.”

The Senate’s plan has been criticized by Senate Democrats who argue that the plan tilts the scale in favor of wealthy Missourians.

“They’re going to brag that they got you a tax cut,” state Sen. Greg Razer, a Kansas City Democrat, said during a floor debate Tuesday. “It’s not going to buy you an extra value meal at McDonald’s. It won’t.”

Senate Republicans have pushed back on criticism of the plan, arguing that the bill was a careful way to cut taxes.

“I think this is a very reasoned approach to this,” state Sen. Andrew Koenig, a Manchester Republican and one of the bill’s sponsors, said Tuesday. “We’re not cutting too fast.”

Senate Majority Leader Caleb Rowden, a Columbia Republican, told reporters after the vote that the tax cut was fair because wealthier people pay more in income tax.

“It doesn’t make any sense economically or with common sense in your head that someone who puts more on the line in certain instances doesn’t get more back,” he said. “I think folks that make those larger sums of money, they pay more in taxes, they pay plenty in taxes.”

Shortly after the Senate vote, House Minority Leader Crystal Quade, a Springfield Democrat, said in a statement that the cut would cost the state roughly $2 billion once fully implemented.

Quade’s statement aligned with Senate Democrats’ stance that the plan is irresponsible because it uses the state’s current budget surplus to make cuts instead of reinvesting the money to government programs. Much of that surplus is fueled by federal COVID-19 stimulus money.

“The state’s temporary revenue surplus masks years of budgetary neglect that’s resulted in a state government that’s barely functional in some respects and outright failing in others,” the statement said. “This irresponsible legislation will have devastating long-term consequences for Missouri government.”

The Senate also on Wednesday voted 26-4 on a bill that would extend various agricultural tax credits to farmers for six years instead of the two-year sunset approved by lawmakers earlier this year. The two pieces of legislation are part of Parson’s special session call.

Later in the day, the Missouri House separately approved a nearly identical version of the agricultural tax credit bill by a vote of 83-28. The legislation now heads to the Senate.

Parson called for the special session after vetoing two tax-related proposals earlier this year.

The first measure would have sent one-time payments to Missourians who owed income tax in 2021 — capped at $500 for individuals or $1,000 for married couples filing jointly.

Parson said the proposal was rushed and would have left out a large group of Missourians.

The second proposal would have extended tax credits for farmers with a two-year sunset provision. Parson balked at the plan, arguing that two years was not enough time for farmers to start new projects with the credits.