(The Center Square) – Missouri taxpayers wouldn’t pay state taxes on public pensions and Social Security benefits under a bill in the Legislature.
House Bill 2853 would allow the maximum state tax deduction to all taxpayers regardless of filing status or adjusted gross income. The bill defines “benefits” as any Social Security benefits received by a taxpayer, regardless of age, including retirement, disability, survivors and supplemental benefits.
“We’re in a situation in this country where we see prices on the increase, and I don’t expect them to go down anytime soon,” Rep. David Evans, R-West Plains, stated during a hearing of the House Pension Committee on Wednesday. “Those who are most affected are those with fixed incomes or an inability or limited ability to earn additional money to meet ever increasing prices.”
Missouri is one of 12 states taxing some or all of their residents’ Social Security benefits, according to AARP. The others are Colorado, Connecticut, Kansas, Minnesota, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont and West Virginia.
Social Security benefits are fully deductible for Missouri residents ages 62 and older with an adjusted gross income of less than $85,000 when filing single or $100,000 if filing married and jointly. The deduction is reduced as adjusted gross income increases.
If the bill becomes law, the maximum deduction to all taxpayers regardless of filing status or adjusted gross income would become effective for all tax years beginning or after Jan. 1, 2023.
Rep. Doug Clemens, D-St. Ann, said the proposed legislation would help many older constituents in his district.
“The cost of living increases that they get with their retirement isn’t keeping up with what they’re facing,” Clemens said. “Between medications, utilities, food and property taxes; that’s another thing we can play with.”
The bill’s fiscal note reported a $331 million impact on the state’s general revenue fund during fiscal year 2024 and $325 million in 2025.
“This is a huge lift, but you have to start the conversation somewhere,” Rep. Michael O’Donnell, R-St. Louis, said. “I appreciate the fiscal note because I’ve always been a little curious about how we could do this. I’m of the mindset where Social Security is a tax and we’re taxing people who are essentially getting their money back.”
Some committee members stated work on the bill should continue next year if the bill doesn’t advance.
“I think this is innovative legislation and it does need to be talked about,” Clemens said. “I just want to say publicly that I think we should have another hearing on this and invite more witnesses.”
