This week, Gov. Mike Parson signed two bills into law, officially ending the special session. The bills decrease personal income tax rates and address legislation that was vetoed in the 2022 regular session, related to agricultural-focused tax credits. Some businesses, such as S-corps, will benefit from the tax cut. Any business that takes business income and reports it on an individual tax return as a pass-through will see a tax reduction.
“The legislation is a measured approach to gradually lower the individual tax rate if certain revenue triggers are met, which strikes the right balance between driving economic growth and protecting the state’s ability to fund essential services,” said Daniel P. Mehan, Missouri Chamber president and CEO. “This will help Missouri remain competitive in the global competition for jobs. Modifying the individual tax rate will help to enhance Missouri’s ability to attract business investment, which ultimately drives growth in both tax revenue and job creation across all regions of our state.”
Specifically, the measure (Senate Bills 3&5) decreases the individual income tax rate from 5.3 percent to 4.95 percent starting in the next calendar year. Additionally, it allows for the rate to lower again to 4.8 percent in 2024, depending on triggers associated with state revenue collection. The individual rate could eventually decrease to 4.5 percent with additional triggers established by the legislation. The bill also exempts the first $1,000 of a taxpayer’s income from taxation in the next calendar year; current law exempts the first $100.
The Ag Tax Credit Bill (House Bill 3) extends agricultural tax credits’ sunset date to six years, as requested by the governor. The legislature passed a bill related to agricultural tax credits in the 2022 legislative session with a two-year sunset date. Gov. Parson vetoed it and instead asked for a six-year limit in order to make the tax credits more workable.
During the debate on the ag bill, an amendment to keep foreign companies from getting access to tax credits was introduced. However, this was ruled out of order because it was considered outside of the call for the special session.
With more than 700 multinational companies creating jobs in Missouri, this amendment would have a negative impact on our economy. This is a concerning issue the Missouri Chamber will continue to monitor in the upcoming session.