(The Center Square) – Missourians will pay less in state taxes in 2023, and some will get a voter-approved wage increase.
Parson called a special legislative session in September, intending to pass a tax cut of approximately $760 million. The law contains triggers to reduce the tax rate by 0.15% and then by an additional one-tenth of a percent if the state exceeds net general revenue collections. If those revenue benchmarks are met, the top tax rate will decrease to 4.5%.
Missouri reported $5.2 billion in November revenue collections, a 14.47% increase compared to the same five-month period in 2021.
The law also increases the income exempted from state tax to $1,000 from the current rate of $100.
Proposition B, approved by more than 62% of Missouri voters in November 2018, increases the state’s minimum wage by 85 cents per hour each year through 2023. All private businesses must pay at least the new hourly rate, except for retail and service businesses whose gross annual sales are less than $500,000.
Missouri’s minimum wage law doesn’t apply to public employers. The law also prohibits the state’s minimum wage from being lower than the federal rate, which is currently $11.15.
Employees receiving tips as compensation must also receive a total of at least $12 per hour. State law requires such employers to pay at least 50% of the minimum wage plus an additional amount to bring an employee’s total compensation to a minimum of $12 per hour.
The tax cut will reduce general revenue by $131 million during fiscal year 2023, which ends June 30, 2023, $335 million in fiscal year 2024 and $370 million in fiscal year 2025, according to the bill’s fiscal note.
The Missouri Budget Project, a nonprofit public policy organization, estimates a household with $30,000 or less in income would realize a $17 reduction in state taxes in 2023 under the new law and $49 annually when the law is fully implemented. A household with $86,000 in income would pay $143 less in state taxes in 2023 and $298 when fully implemented.
The top 1% of taxpayers – those making more than $552,000 whose average income is $1.6 million – would pay $4,214 less in state taxes in 2023. The reduction would increase to $9,578 when fully implemented.