Missouri Gov. Parson signs income tax cut, farmer credits to end special session

David A. Lieb/Associated Press file photo

Missouri Republican Gov. Mike Parson on Wednesday signed into law legislation that lowers the state’s individual income tax rate, officially ending the legislature’s slow-moving special session over tax cuts.

The new law, approved by the General Assembly last week, lowers the top state income tax rate from 5.3% to 4.95% starting next year. The top state income tax rate applies to Missourians who make roughly $22,000 or more a year. If the state experiences revenue growth, the rate would drop to 4.5% when the plan is fully implemented in five years.

“We are providing real, permanent relief to Missourians and trusting them to spend their own money,” Parson said during a bill signing ceremony in Jefferson City. “Missourians know their own needs, not government.”

However, an analysis of the plan published late last month by the Missouri Budget Project, a nonprofit that analyzes fiscal policy, found that the bill would leave out one-third of Missourians. It also found that taxpayers making $22,000 or less would each receive an average cut of $3, while those in the top 1% would receive an average cut of $4,214 next year.

The legislation is a modified version of the Republican governor’s special session call to lower the state’s income tax rate to 4.8%. Parson’s original plan did not call for gradual cuts.

It also eliminates income taxes for people making less than $13,000 a year and couples making less than $26,000.

Republicans in both chambers of the legislature have painted the tax cut as a smart way to lower Missourians’ income tax burden using the state’s revenue surplus.

“This is a very measured, very conservative move in the right direction,” state Rep. Doug Richey, an Excelsior Springs Republican, said last week. “And it does get us to a place in the future, over an extended period of time, to 4.5% which is a good move.”

But the law has been criticized by Democrats who argue that the tax cut largely benefits wealthy Missourians.

“Well, here we go again — another tax cut for the wealthy,” state Rep. Peter Meredith, a St. Louis Democrat, said last week. “Doesn’t do much for working class folks, does absolutely nothing for the lowest income folks and folks on fixed incomes.

“Somehow we think that’s going to be good for our economy. How many times do we have to try this experiment, watch it fail, in order to realize that’s not how we grow our state?”

Parson, who has a background in cattle farming, also signed into law 10 agriculture-related tax credits. The credits will be in place for six years, rather than the two years approved by the legislature earlier this year.

“Missouri agriculture should not be treated differently than any other business or any other industry and today is a huge win for agriculture,” Parson said Wednesday.

The income tax cut and agricultural credits were part of Parson’s special session call. He called for the special session after vetoing two tax-related proposals earlier this year.

The Republican governor had repeatedly refused to expand the special session for other big-ticket issues, including repealing the state’s abortion ban, legalizing marijuana and sports betting.