In early May, the Missouri General Assembly overrode a veto by Gov. Jay Nixon to give Missourians their first income tax cut in nearly 100 years. Here are the details of who gets the cut, when it will begin and how small businesses will benefit.
Once fully phased in, the new income tax in Missouri will be 5.5 percent. The state’s current income tax rate is 6 percent.
Who gets this tax cut?
All Missouri taxpayers.
When will the tax cut take effect?
The tax cut is designed to be phased in over five years, with the income tax rate dropping by .1 percent each year. The law specifies that the first cut could happen in 2017. However, the bill also requires that state revenue increase by $150 million before each of the yearly .1 percent drops happen. So, depending on state revenue growth, 2022 is the earliest year when Missourians would be paying 5.5 percent. However, the full phase in could take longer if state revenues don’t grow by $150 million per year.
Will the tax cut hurt education funding?
No. The bill was carefully designed to ensure lawmakers will continue to have funds available to increase funding for education. By requiring revenue growth prior to taxpayers seeing a rate reduction, the law ensures state budget makers will continue to have the funds they need to fulfill their obligations to Missouri’s schools, colleges and universities.
How does this help small businesses?
Small business owners, like all Missourians, will be paying the lower 5.5 percent income tax rate once it is fully phased in. However, the new law also includes a special pass-through provision allowing a new 25 percent deduction on business income that is reported by individuals.
When does the new small business tax cut take effect?
This new 25 percent small business income deduction has the same trigger as the income tax cut. It will occur in five annual 5 percent deductions beginning in 2017. Like the income tax cut, state revenues must grow by $150 million each year for the cut to take effect. So, again, 2022 is the earliest year this deduction could be fully phased in.
What bill contained this tax cut?
Senate Bill 509, sponsored by Sen. Will Kraus.
Who should I contact for more information?
You can contact Tracy King, Missouri Chamber vice president of governmental affairs, at email@example.com, or by phone at 573-634-3511.