Governor aiming for permanent income tax cut, rather than one-time rebate, in Missouri legislative special session

JEFFERSON CITY, Mo. – With 40-year-high inflation continually causing citizens to spend more for everyday items, legislators and political leaders are gearing up for a special session intended to give Missourians some tax relief. 

The Missouri House passed a $1 billion tax rebate measure during this year’s legislative session to hopefully ease some of the financial burden brought on by rising costs. However, after debate in the Senate cut the rebate down to roughly $500 million, Gov. Mike Parson vetoed the bill and later hinted at an upcoming special session focused on cutting income taxes instead. 

“I have always advocated for reducing Missourians’ tax burden and support the spirit of this legislation,” Parson said in a press release announcing his veto. “However, the reality is, we can do better for all Missouri taxpayers than HB 2090, and I want to focus on a comprehensive and permanent tax reform package.”

There is currently a statute that brings down Missouri’s income tax by .1% each time a certain state revenue milestone is reached. But, those familiar with the special session told The Heartlander Parson wants to expedite that process, instead of having to wait to hit milestones to give Missourians some relief. 

“We are planning a special session to pass the LARGEST state income TAX CUT in Missouri history that will provide permanent tax relief for Missourians,” Parson said in an Aug. 8 social media post. “As the nation and Missouri face record inflation, historically high gas prices, and rising food costs, we want to provide permanent tax relief that provides yearly savings to Missourians … not a temporary stimulus.”

State Rep. Cody Smith, the sponsor of the vetoed tax rebate measure, fought hard to get the legislation to the governor’s desk, but seemed just as zealous to work with Parson during the special session to deliver an income tax cut to Missourians.

“In a time where our state has more cash than ever before, I will do everything within my power to put that money back into the taxpayer’s pocket, and I look forward to working with the governor to do so,” Smith said in a statement after Parson’s veto. 

For the second straight year, Missouri reportedly set a record for the most money on hand in its history in July 2022, yielding a budget surplus of $4.9 billion. 

Jeremy Cady, director of Americans for Prosperity-Missouri – which supported the original rebate measure vetoed by Parson – agrees with the governor that an income tax cut would better benefit Missourians.

“It would be better for Missouri overall to actually do more of a permanent tax cut to reduce the income tax,” Cady told The Heartlander Tuesday. “Population-wise, we have been pretty stagnant for 20, 30, 40 years now overall. If we really want to induce growth in the state, then we really need to look at bigger reforms like the tax cut.”

Cady pointed out that states with zero income tax – including Florida, Tennessee and Texas – are flourishing with growth at the moment. An unprecedented number of citizens have been reported moving from California – the state with the highest income tax at 13.3%, according to TurboTax – to Texas, a state with no such tax burden. 

“I think moving forward, at some point in time Missouri really needs to look at how we can get to 0% income tax and be competitive with other states across the nation,” he noted.

There is speculation around how much – or how little – Parson is aiming to decrease Missouri’s sales tax, but several sources familiar with the situation believe it will end up around 4.8%, down from the current 5.3%. There has not yet been a date announced for the special session. 

“Now is the time to take additional steps to help alleviate the strain on Missouri families,” Parson said. “Permanent tax cuts that provide real relief to families, senior citizens, the working class, and small businesses every year is a better answer to the inflationary pressure we face, and we look forward to getting it done.”

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